Investment Rating - The report assigns a rating of "Outperform" for Youyou Foods, indicating an expected total return over the next 12-18 months that exceeds the return of its relevant broad market benchmark [20]. Core Insights - Youyou Foods reported strong growth in revenue and net profit for 1H25, with total operating revenue reaching RMB 770 million, a year-on-year increase of 45.6%, and net profit attributable to shareholders at RMB 110 million, up 42.5% [2][8]. - The company's pickled chicken feet business continues to lead, contributing approximately 50% of main business revenue, while the overall meat product revenue grew by 50.5% year-on-year [3][9]. - The company is expanding its product portfolio and channel structure, with significant growth driven by partnerships with high-quality suppliers and a focus on R&D to create differentiated products [3][9][10]. Financial Performance - In 1H25, the gross margin was 27.6%, down 3.2 percentage points year-on-year, while the gross margin for 2Q25 was 28.0%, reflecting a slight improvement compared to 1Q25 [2][8]. - Selling and administrative expense ratios decreased, with 1H25 ratios at 8.4% and 3.2%, down 3.5 percentage points and 0.8 percentage points year-on-year, respectively [2][8]. - The company reported a net cash flow from operating activities of RMB 140 million in 1H25, compared to RMB 120 million in the same period last year [2][8]. Product and Channel Strategy - The pickled chicken feet product remains a core driver of revenue, with the company also focusing on meat-based snacks and vegetarian products to diversify its offerings [3][9]. - Sam's Club has emerged as a significant growth channel, with revenue exceeding RMB 100 million in 2Q25, contributing to a strong offline sales performance [4][10]. - The company maintains an offline-dominant sales model, with over 90% of sales coming from offline channels in 1H25, while online sales grew by 116% year-on-year [4][10]. Full-Year Outlook - For the full year, Youyou Foods is expected to achieve revenue exceeding RMB 1 billion, with double-digit year-on-year growth, supported by economies of scale and effective cost control [5][11]. - The report anticipates that the company's profitability and operating efficiency will improve as it continues to leverage channel growth and product innovation [5][11][13].