Fuling Zhacai reported 9M25 revenue/attributable NP/recurring attributable NP of RMB2,000/670/610mn(+1.8/+0.3/-3.4%yoy);3Q25 revenue/attributable NP/recurring attributable NP reached RMB690/230/200mn(+4.5/+4.3/-5.6%yoy).3Q25 profit remained stable amid soft zhacai demand,with market share gains driven by enhanced cost-performance and continued ground promotions for new products like radishes.On profitability,low raw material costs(eg,mustard stems)persisted in 3Q25,though GPM fell 3.2pp yoy due to higher discounts&promotions,while recurring NPM dropped 3.1pp yoy on elevated new product marketing expenses.The company terminated the Weizimei acquisition,prioritizing risk-controlled organic growth for its main business.For 4Q25,operations may in our view gradually improve alongside economic recovery,with new products&channels unlocking growth potential.With ample low-cost raw material inventories,Fuling Zhacai should in our view sustain cost advantages,providing room for marketing spend.We await revenue growth to drive profit expansion,maintaining BUY.
New category/channel likely to unlock new growth room
With fewer post-pandemic home-consumption scenarios,overall zhacai demand remained soft in 3Q25.The company maintained its strategy since 2025:on the product front,while industry-wide zhacai sales stabilized amid saturated competition in tier-1&-2 cities,the share of small-pack/multi-flavor products grew.The company focused on promoting RMB2-pack products to enhance cost-performance and gain market share.New products like radishes and zhacai sauce were launched this year,with optimized flavors and processes,targeting mainstream price ranges alongside increased ground promotions to build asecond growth curve.Channel-wise,it strengthened partnerships with membership stores/warehouse retailers via customized products,collaborating with Freshhippo on crispy radish strips and launching adual-pack zhacai combo at Sam’s Club on 22 Oct,marking akey step in new channel expansion to unlock growth potential.
3Q25:cost edges sustained;NPM yoy slightly strained
For 9M25,its GPM was 53.7%,up 1.1pp yoy(3Q25 GPM:52.9%,-3.2pp yoy).The 9M25 GPM expansion benefited from lower mustard stem prices,while 3Q25 costs remained low with limited yoy change;increased promotions and product mix shifts drove the yoy GPM decline.On expenses,9M25 sales/administrative expense ratios were 16.0/3.1%,+2.1/-0.1pp yoy(3Q25:+0.8/-0.3pp yoy),with higher sales expense ratio mainly from new product promotions(eg,ground campaigns,tastings,etc.).The 9M25 attributable NPM was 33.7%,down 0.5pp yoy;3Q25 NPM was 33.9%,down 0.04pp yoy.Looking ahead,ample low-cost raw material reserves should in our view sustain its cost advantages,supporting increased channel spending amid weak consumption to drive revenue growth.
Earnings forecasts and valuation
We maintain our earnings forecasts,expecting 2025-2027 EPS of RMB0.72/0.78/0.85.We value the stock at 20x 2026E PE,on par with its peers’average on Wind consensus,for our target price of RMB15.6(previous:RMB15.84,on 22x 2025E PE).Maintain BUY.
Risks:intensifying industry competition;channel expansion falling short of our expectations;food-safety issues.