Core Viewpoint - Petty Co., a leading player in the domestic pet food industry, reported a nearly 20% year-on-year decline in net profit for the first half of 2025, primarily due to a significant drop in overseas market revenue caused by U.S. tariffs and other factors [2][3]. Group 1: Financial Performance - In the first half of 2025, Petty Co. achieved revenue of 728 million yuan, a year-on-year decrease of 13.94%, and a net profit attributable to shareholders of 79.1 million yuan, down 19.23% year-on-year [3][5]. - The company's revenue from overseas markets still accounted for over 80% as of the end of 2024, with the U.S. being the most significant overseas market [2][4]. - Despite a substantial increase in domestic market revenue, the overall pet food business revenue still declined due to the heavy reliance on overseas markets [5][6]. Group 2: Market Challenges - The decline in revenue is attributed to the U.S. government's tariff policies, which have affected the order rhythm from overseas clients, leading to a phase of revenue pressure [4][6]. - The company has expressed concerns about its heavy dependence on the U.S. market and is strategically adjusting to expand its non-U.S. customer base to mitigate risks associated with reliance on a single market [6][8]. Group 3: Business Segment Performance - The main product lines, particularly "main food and wet food," have seen a significant revenue decline, with a 44.74% drop in revenue for these segments in the first half of 2025 [7][10]. - The company reported that the revenue from its main food and wet food business fell to 45 million yuan, contributing only 6.23% to total revenue, down from 9.71% in the previous year [9][10]. Group 4: Investment Projects - Petty Co. has two major capacity expansion projects for pet food under construction, but the ongoing decline in main food and wet food revenue raises uncertainties about the future performance of these projects [7][10]. - The two projects, initially expected to be completed by the end of 2025, have faced multiple delays, with completion now pushed to the end of 2027 [8][9]. - The first project aims for an annual sales revenue of 534 million yuan and a net profit of 51.1 million yuan upon reaching full capacity, while the second project targets 775.8 million yuan in annual sales and 79.31 million yuan in net profit [8].

Investment Rating - The report maintains a rating of "Accumulate" for the company [7]. Core Views - The company has seen a significant improvement in gross margin due to enhanced focus on staple food products, despite a decline in overall revenue [2][3]. - The company is expanding its product lineup in staple foods, which is expected to become a key growth driver in the future [3][4]. - The net profit margin has improved in Q2 2025, indicating better profitability [4]. Summary by Sections Financial Performance - In H1 2025, the company achieved revenue of 728 million yuan, a year-on-year decrease of 13.94%, and a net profit of 79 million yuan, down 19.23% [2]. - Q2 2025 saw revenue of 399 million yuan, a decline of 13.56% year-on-year, but net profit increased by 1.15% to 57 million yuan [2]. Product and Market Analysis - Domestic self-owned brand performance is stable, with the "Jueyan" brand showing rapid growth [3]. - The company is increasing its focus on staple food products, launching a series of new offerings such as air-dried, baked, and freeze-dried foods [3]. Margin and Cost Analysis - The gross margin for H1 2025 was 31.98%, improving to 34.76% in Q2 2025, with a year-on-year increase of 6.75 percentage points [4]. - The net profit margin for Q2 2025 was 14.27%, reflecting a year-on-year increase of 2.08 percentage points [4]. Profit Forecast and Valuation - The profit forecasts for 2025-2027 have been adjusted to 187 million, 221 million, and 249 million yuan respectively, with corresponding EPS of 0.75, 0.89, and 1.00 yuan [5][6]. - The current stock price corresponds to a P/E ratio of 24 for 2025, 21 for 2026, and 18 for 2027 [5].

Summary of Petty Co. Conference Call Company Overview - **Company**: Petty Co. - **Industry**: Pet Food and Snacks Key Points Overseas Business Performance - Petty Co. reported stable overseas shipment volumes in Q2 2025 compared to the same period last year, indicating steady overseas demand [2][3] - The company plans to cover tariffs through cost-plus pricing and expects overseas clients to share some of the costs, maintaining a positive outlook on overseas business profitability recovery in the medium to long term [2][3] Gross Margin Insights - Gross margins for three product categories—plant-based gel, bark gel, and nutritious meat snacks—ranged from 3% to 6.75% in Q2, benefiting from cost control and economies of scale at overseas factories [2][3] - Stable raw material prices and the depreciation of the Vietnamese Dong contributed positively to margins, with expectations for this trend to continue in the second half of the year [2][7] Domestic Market Growth - The domestic market saw significant growth, with the Jieyan brand achieving over 40% growth, becoming a key growth driver [2][5] - The company is shifting focus from the Ziliang agency business to the Jieyan brand, increasing investment in this area [2][5] - The Wenzhou baking grain production line has been launched to enhance the staple food product line and target the domestic staple food market [2][5] Future Orders and Revenue Expectations - Q3 orders are expected to be flat year-over-year, but revenue may fall short of last year's due to tariff impacts; however, Q4 is anticipated to see a recovery in export revenue [2][6][8] - The company plans to promote baking grain products in the domestic market in the second half of the year, with the New Zealand staple food potentially delayed until the end of the year or early next year [2][6] Sales and Marketing Strategy - Sales expenses will focus on supporting the new product "Yuanliwan" and the Jieyan brand, with a target to keep the sales expense ratio around 30% [2][9] - Significant pre-launch investments were made before the 618 shopping festival, with additional support planned for baking grain products in the second half of the year [2][9] Online and Offline Sales Channels - Online channels contribute over 70% of total sales, with major platforms being Taobao and JD.com; Douyin and Xiaohongshu are used primarily for brand promotion [2][4][12] - The Jieyan brand performs exceptionally well online, while offline sales are mainly through large supermarkets [2][4][12] Product Development and Future Plans - The Smart Balance brand is set to enter the domestic market after obtaining regulatory approval, focusing on mid to high-end positioning [2][4][18][24] - New Zealand staple food is expected to launch by the end of the year, with a strategy to first enter online channels before expanding to offline new retail channels [2][5][17] - The company plans to introduce multiple staple food products in 2025 to establish a foundation for significant growth in 2026 [2][26][27] Financial Outlook - The free brand is expected to continue incurring losses in 2025, but these losses are projected to narrow compared to 2024 [2][14] - The company aims for a breakeven point in the domestic market if revenues reach between 700 million to 800 million yuan [2][27] Consumer Education and Marketing - Petty Co. utilizes social media platforms like Xiaohongshu and Douyin for consumer education, leveraging influencers to enhance brand awareness [2][22][23] Conclusion - Overall, Petty Co. maintains a positive outlook for both domestic and overseas markets, focusing on product diversification and effective cost management to drive future growth and profitability [2][26][27]

Investment Rating - The investment rating for Petty Co., Ltd. is maintained as "Buy" [4] Core Views - The report highlights that the company's overseas business is under pressure due to tariff impacts, but the gross profit margin is steadily increasing. The company reported a revenue of 728 million yuan for H1 2025, a year-on-year decrease of 13.94%, and a net profit attributable to the parent company of 79 million yuan, down 19.23% year-on-year. However, the second quarter showed signs of recovery with a revenue of 399 million yuan, a decrease of 13.56%, but a slight increase in net profit by 1.15% year-on-year [4][5] Financial Performance - For H1 2025, the company's gross profit margin was 31.98%, up 5.63 percentage points year-on-year, while the net profit margin was 10.87%, down 0.71 percentage points. The increase in expenses was attributed to higher sales and management expenses due to brand investments and operational costs in New Zealand [5] - The company expects net profits for 2025-2027 to be 210 million, 243 million, and 284 million yuan respectively, with corresponding EPS of 0.84, 0.98, and 1.14 yuan. The current stock price corresponds to P/E ratios of 21.7, 18.7, and 16.0 times for the respective years [4][8] Product Performance - The report indicates that all product categories have seen an increase in gross profit margins, particularly in the staple food and wet food segments, driven by strong sales of the "Jueyan" dry food products. The revenue for various product lines in H1 2025 showed mixed results, with significant declines in some categories but growth in nutritional meat snacks [6][7] Strategic Initiatives - The company is focusing on launching new products across its brands. "Jueyan" introduced several new freeze-dried products for small dogs and plans to expand its product lines in H2 2025. "Haoshijia" is also launching new products to fill market gaps in the mid-range price segment, enhancing brand synergy [7]

Core Viewpoint - The company experienced a decline in revenue and net profit in the first half of 2025, but showed resilience in its domestic brand growth and improved profitability metrics [1][2][3] Financial Performance - In 1H2025, the company reported revenue of 728 million yuan, a decrease of 13.94% year-on-year, and a net profit of 79 million yuan, down 19.23% year-on-year [1] - The second quarter showed a slight improvement with revenue down 13.56% year-on-year and net profit up 1.15% year-on-year [1] Product Performance - Revenue from various product lines in 1H2025 included: - Livestock skin chew revenue of 232 million yuan (down 11.91%) with a gross margin of 28.08% (up 5.28 percentage points) - Plant-based chew revenue of 221 million yuan (down 25.72%) with a gross margin of 32.07% (up 3.12 percentage points) - Nutritional meat snacks revenue of 217 million yuan (up 14.35%) with a gross margin of 36.62% (up 6.75 percentage points) - Main and wet food revenue of 45 million yuan (down 44.74%) with a gross margin of 33.27% (up 11.04 percentage points) [2] International Business and Brand Strategy - The overseas business faced challenges with a 21% year-on-year decline in foreign sales due to order rhythm from overseas clients, but the company aims to enhance its resilience by expanding non-US customer outreach [2] - The domestic brand continued to grow rapidly, focusing on product innovation with new launches in the first half of the year and plans for further product introductions in the second half [2] Profitability Metrics - The company achieved a gross margin of 31.98% in 1H2025, an increase of 5.63 percentage points, with a second quarter gross margin of 34.76% [3] - The net profit margin for 1H2025 was 11.00%, a decrease of 0.65 percentage points, with a second quarter net profit margin of 14.25% [3] Expense Ratios - The sales expense ratio increased by 1.65 percentage points to 7.66% due to higher investments in the domestic brand [3] - The management expense ratio rose by 2.64 percentage points to 8.53%, primarily due to increased operational expenses from New Zealand's natural products [3] Investment Outlook - The company forecasts net profits of 197 million yuan, 236 million yuan, and 281 million yuan for 2025-2027, with corresponding price-to-earnings ratios of 22.5, 18.7, and 15.8 times based on the closing price on August 26 [3]

Investment Rating - The report maintains a "Strong Buy" rating for Petty Co., Ltd. [2][5] Core Views - The company reported a revenue of 728 million yuan for the first half of 2025, a year-on-year decrease of 13.94%, and a net profit attributable to shareholders of 79 million yuan, down 19.23% year-on-year. The fluctuation in revenue is attributed to the impact of U.S. tariff policies, which affected customer order rhythms. However, the company has managed to improve its gross margin through cost reduction and product structure optimization, achieving a gross margin of 31.98% in H1 2025, an increase of 5.63 percentage points compared to the same period last year [3][4]. - The company has seen improvements in gross margins across its main product categories, with significant increases in the gross margins of pet food products such as animal skin chews, plant-based chews, and nutritional meat snacks [3]. - The company is focusing on developing its own brands in the domestic market, targeting mid-to-high-end pet owners, and has launched several new products under its brands [4]. Financial Performance Summary - The company expects the most significant impact from tariffs to have passed, with operations anticipated to gradually improve in the second half of 2025. Projected net profits for 2025-2027 are 199 million, 234 million, and 286 million yuan, respectively, with corresponding EPS of 0.79, 0.92, and 1.13 yuan, and PE ratios of 23, 19, and 16 times [5][6]. - The financial forecast indicates a revenue growth rate of 7.20% for 2025, with a projected revenue of 1.78 billion yuan, and a net profit growth rate of 9.19% [6]. Company Overview - Petty Co., Ltd. was established in October 2002 and is one of the earliest companies in China specializing in the pet food industry. It is also the first company in the pet industry to be publicly listed on the A-share market in China [7]. - The company operates multiple domestic and international brands, including Healthguard, ChewNergy, Meatyway, and others, focusing on the research, manufacturing, and sales of pet food [7]. Market Position and Strategy - The company has maintained stable order shipments with overseas clients, particularly in Southeast Asia, and expects its overseas ODM business to remain robust throughout the year [3]. - The domestic market strategy emphasizes the development of proprietary brands and the introduction of new products aimed at capturing the mid-to-high-end pet owner demographic [4].

Investment Rating - The report maintains a "Buy" rating for the company [5][4]. Core Insights - The company reported a revenue of 728 million RMB for H1 2025, a year-over-year decrease of 13.94%, with a net profit attributable to the parent company of 79.1 million RMB, down 19.23% year-over-year [1][2]. - In Q2 2025, the company achieved a revenue of 399 million RMB, representing a year-over-year decline of 13.56% but a quarter-over-quarter increase of 21.17%. The net profit for Q2 was 56.87 million RMB, showing a year-over-year increase of 1.15% and a quarter-over-quarter increase of 155.85% [1][2]. - The report highlights that the impact of tariffs continues to pressure overseas revenue, which is estimated to have declined by approximately 15% year-over-year, while domestic revenue is slightly down due to a high base from last year’s agency business. However, the company's proprietary brands are experiencing rapid growth [2][3]. Summary by Sections Revenue and Profitability - For H1 2025, the revenue breakdown includes: - Chewable animal skin revenue of 232 million RMB, down 11.91% year-over-year, with a gross margin increase of 5.28 percentage points - Plant-based chewable revenue of 221 million RMB, down 25.72%, with a gross margin increase of 3.12 percentage points - Nutritional meat snacks revenue of 217 million RMB, up 14.35%, with a gross margin increase of 6.75 percentage points - Main and wet food revenue of 45 million RMB, down 44.74%, with a gross margin increase of 11.04 percentage points [2][3]. Margin Improvement - The company has shifted most of its production capacity to overseas factories in Vietnam and Cambodia, leading to improved raw material costs and exchange rates, resulting in a gross margin of 32% for H1 2025, up 5.63 percentage points year-over-year. Q2 2025 gross margin reached 34.8%, up 6.75 percentage points year-over-year [3][4]. Future Outlook - The company is expected to launch new products such as honey-glazed rabbit bones and baked dog food, which may further enhance domestic business margins and drive growth in proprietary brands [3][4]. - The profit forecast for 2025-2027 is set at 189 million RMB, 224 million RMB, and 263 million RMB respectively, with corresponding EPS of 0.76, 0.90, and 1.06 RMB [4][8]. - The target price is set at 22.04 RMB, based on a PE ratio of 29 times for 2025 [4][5].

Core Insights - Petty Co. reported a revenue of 1.659 billion yuan for 2024, marking a year-on-year increase of 17.6%, and achieved a net profit of 182 million yuan, reversing previous losses [1] - The gross margin for 2024 improved to 29.4%, an increase of over 10 percentage points, attributed to product structure optimization and enhanced capacity utilization in overseas bases [1] - The company experienced fluctuations in quarterly performance, with Q4 2024 and Q1 2025 revenues of 336 million yuan (down 32.1% year-on-year) and 329 million yuan (down 14.4% year-on-year), respectively, influenced by customer order volatility [1] Business Segments - Revenue from various business segments in 2024 included: - Pet skin chew toys: 505 million yuan (+19.1%) - Plant-based chew toys: 608 million yuan (+43.7%) - Nutritional meat snacks: 403 million yuan (+26.6%) - Staple food: 118 million yuan (-43.6%) [1] - The Cambodian factory significantly improved its profitability, achieving a net profit of 51 million yuan with a profit margin of 14.3% in 2024, compared to a loss in 2023 [2] - The New Zealand facility has commenced production of 40,000 tons of high-quality staple food, with expected capacity release of 20%-30% in 2025 [2] Market Strategy - The company has successfully shifted nearly all U.S. customer orders to Southeast Asian factories to mitigate tariff fluctuations, leveraging its global production layout [2] - In the domestic market, Petty Co. achieved sales revenue of 288 million yuan in 2024, primarily driven by its own brands, which saw a 33% revenue growth, with the Jueyan brand growing by 52% [2] - The gross margin for domestic sales reached 31.7%, reflecting an improvement of 8.04 percentage points, indicating enhanced profitability [2] Financial Forecast - Revenue projections for Petty Co. from 2025 to 2027 are estimated at 1.914 billion yuan, 2.163 billion yuan, and 2.387 billion yuan, representing year-on-year growth rates of 15.34%, 13.04%, and 10.37%, respectively [3] - Net profit forecasts for the same period are 199 million yuan, 221 million yuan, and 251 million yuan, with corresponding growth rates of 9.16%, 11.15%, and 13.53% [3] - The projected price-to-earnings ratios for 2025, 2026, and 2027 are 18.85x, 16.96x, and 14.94x, respectively, maintaining a "buy" rating [3]

Investment Rating - The investment rating for the company is "Buy" [4] Core Insights - The company achieved a revenue of 1.659 billion yuan in 2024, representing a year-on-year growth of 17.6%, and a net profit of 182 million yuan, marking a return to profitability [1] - The gross margin improved to 29.4% in 2024, an increase of over 10 percentage points year-on-year, driven by product mix optimization and enhanced capacity utilization in overseas bases [1] - The company plans to focus on its proprietary brands and create blockbuster products to drive growth in 2025 [3] Financial Performance - In 2024, revenue from various segments included: 505 million yuan from pet skin chews (+19.1%), 608 million yuan from plant-based chews (+43.7%), 403 million yuan from nutritious meat snacks (+26.6%), and 118 million yuan from staple and wet food (-43.6%) [1] - Quarterly performance showed a revenue of 336 million yuan in Q4 2024 (down 32.1% year-on-year) and 329 million yuan in Q1 2025 (down 14.4% year-on-year), with net profits of 27 million yuan and 22 million yuan respectively [1] Revenue and Profit Forecast - Projected revenues for 2025-2027 are 1.914 billion yuan, 2.163 billion yuan, and 2.387 billion yuan, with year-on-year growth rates of 15.34%, 13.04%, and 10.37% respectively [4] - Expected net profits for the same period are 199 million yuan, 221 million yuan, and 251 million yuan, with growth rates of 9.16%, 11.15%, and 13.53% respectively [4] Market Position and Strategy - The company reported domestic sales of 288 million yuan in 2024, primarily driven by proprietary brands, which saw a 33% increase in revenue, with the Jueyan brand growing by 52% [3] - The overseas capacity utilization remains high, with factories in Vietnam operating at full capacity and significant improvements in profitability from the Cambodia factory [2][9]