Summary of Weilong Delicious (9985 HK) Equity Research Report Company Overview - Company: Weilong Delicious - Ticker: 9985 HK - Industry: Food Products - Market Cap: HKD 29,247 million (USD 3,762 million) as of 14 October 2025 Key Takeaways from the Conference Call 1. Business Performance - 3Q25 Business Progress: The company reported that its business progress in 3Q25 was in line with expectations, with stable trends in seasoned flour products and growth in traditional konjac flavor products. Monthly sales of sesame paste flavor products increased from RMB 40-50 million in August to RMB 70-80 million in September, indicating strong demand [3][4][14]. 2. Financial Outlook - Gross Margin: The gross margin narrowed by 2.6 percentage points year-over-year to 47.2% in 1H25 due to high prices of konjak mannan. The company expects the gross margin to remain stable in 2H25, with a target range of 46-48% [4][22]. - Operating Expenses: The operating expenses ratio may increase in 2H25 due to higher marketing expenses for the konjac market [4][22]. - Net Margin Guidance: The company maintains a steady net margin guidance of 18-20% [4][22]. 3. Strategic Initiatives - Omni-Channel Strategy: - Despite challenges in same-store growth for discount snack food operators, Weilong achieved steady growth in this channel. - The company is launching more products through innovative flavors and packaging in collaboration with membership-only retailers. - Plans for overseas expansion include distributing vegetable products in Thailand through partnerships with local retailers [5][22]. 4. Investment Rating and Target Price - Rating: Maintain Buy rating - Target Price: HKD 16.50, implying approximately 37% upside from the current share price of HKD 12.03 [6][22]. 5. Potential Catalysts and Risks - Catalysts: Successful new product expansion, capacity expansion, positive overseas development, and easing cost pressures [7][22]. - Risks: Food safety concerns, intensifying competition, rising raw material prices, and potential governance issues [7][22]. Financial Projections - Revenue Growth: Projected revenue growth of 28.6% in 2024, tapering to 15.5% by 2027 [16][15]. - Earnings Per Share (EPS): Expected EPS growth from CNY 0.44 in 2024 to CNY 0.77 in 2027 [10][15]. Conclusion Weilong Delicious is positioned for stable growth with a focus on expanding its product offerings and market presence, particularly in the konjac category and overseas markets. The company maintains a positive outlook despite some margin pressures and operational challenges. The investment rating remains bullish with a significant upside potential based on current valuations.
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