Summary of the Conference Call for Lusi Co., Ltd. Industry Overview - The domestic pet industry is expected to exceed 300 billion yuan by 2024, with a compound annual growth rate (CAGR) of nearly 10% from 2018 to 2024 [9][10] - The pet food segment remains the largest expenditure category, accounting for over 50% of total spending [11] - The pet economy's CAGR from 2018 to 2024 is close to 10%, with the cat economy growing at 14%, significantly outpacing the dog economy [10] Company Overview - Lusi Co., Ltd. operates under a dual domestic and international growth model, with overseas markets serving as the profit foundation while domestic investments are just beginning [2][4] - The company has been in the pet food industry for 20 years, initially focusing on OEM services for European and American brands before developing its own brands [3] Financial Performance - In the first half of 2025, Lusi's overseas business grew by 19% year-on-year, but the Cambodian factory incurred a loss of approximately 7 million yuan due to initial operational inefficiencies [2][7] - The gross margin for staple food products has been increasing, reaching 22%-23% in the first half of 2025, up from 19% in 2024 [7] - The company anticipates a revenue growth rate of 15%-20% for the year, but profit growth is expected to be only 0%-5% due to various challenges [8] Product and Market Strategy - Lusi's product range includes staple foods, jerky, canned goods, and meat powder, with jerky being the largest segment [5] - The company launched a new brand, Miaoguan, focusing on cost-effective products to capture market share [3][18] - The company plans to enhance its production capacity in Cambodia to improve profitability and is also expanding its canned goods production in Shandong [17] Competitive Landscape - The pet food market in China is characterized by low concentration, with the top ten brands holding only 26% market share, compared to 42% in the U.S. [12] - Online sales channels are rapidly growing, with a CAGR of 35% from 2017 to 2024, and domestic brands are gaining a competitive edge [13] Customer and Market Distribution - Lusi's primary customer is Germany's Furins, with a stable European market. The Russian market is growing rapidly, accounting for about 20% of sales, while the U.S. market is just beginning to ramp up [19] Marketing and Brand Development - The company operates an original IP, "Dalu and Sisi," to enhance brand awareness through storytelling, although it has not yet significantly impacted sales [20] Future Outlook - Lusi remains optimistic about its long-term growth potential, focusing on brand development and maintaining a strong relationship with its customers despite short-term profit pressures [21]

Investment Rating - The investment rating for the company is "Accumulate" (maintained) [1] Core Views - The report indicates that the domestic growth rate has slightly slowed down due to the impact of meat powder, while the overseas market is gradually expanding [1] - The company has adjusted its profit forecast for 2025-2027, expecting net profits of 0.80 billion, 0.95 billion, and 1.15 billion respectively, with year-on-year growth rates of 2%, 20%, and 20% [7] Financial Performance Summary - For 2023A, total revenue is projected at 696.31 million, with a year-on-year growth of 26.82% - The net profit attributable to the parent company for 2023A is expected to be 68.40 million, reflecting a year-on-year increase of 58.58% [1] - The earnings per share (EPS) for 2023A is estimated at 0.66 yuan, with a price-to-earnings (P/E) ratio of 35.19 [1] Revenue and Profit Forecast - The total revenue forecast for 2025E is 887.43 million, with a year-on-year growth of 14.12% - The net profit attributable to the parent company for 2025E is projected at 79.73 million, showing a year-on-year increase of 1.75% [1][8] - The EPS for 2025E is expected to be 0.77 yuan, with a P/E ratio of 30.19 [1] Market Data - The closing price of the stock is 23.30 yuan, with a market capitalization of 2,407.04 million [5] - The company has a price-to-book (P/B) ratio of 4.21 and a total asset-liability ratio of 24.05% [6]

Investment Rating - The investment rating for the company is "Accumulate" (maintained) [5] Core Views - The company achieved a year-on-year revenue growth of 11.32% in H1 2025, with total revenue reaching 390 million yuan and a net profit of 30.46 million yuan, reflecting a decline of 12.07% year-on-year [7] - The company’s gross profit margin was 20.9%, down by 1.5 percentage points year-on-year, with a net profit margin of 6.9%, down by 3.2 percentage points year-on-year [7] - The company’s overseas revenue grew by 19% year-on-year, while the domestic market saw a decline in certain product categories, prompting the launch of a new brand to target niche markets [5][7] Financial Performance Summary - In H1 2025, the company’s main grain product revenue increased by 40% to 59.46 million yuan, with a gross margin improvement of 5 percentage points [7] - The company’s revenue from meat jerky products was 220 million yuan, accounting for 57.75% of total revenue, with a gross margin of 23.4% [7] - The company’s revenue from canned products increased by 61.13% to 34.17 million yuan, while revenue from meat powder products decreased by 9.72% to 48.495 million yuan [7] - The company’s projected net profits for 2025-2027 are estimated at 81 million, 98 million, and 120 million yuan respectively, with corresponding P/E ratios of 29.7, 24.6, and 20.0 [8]