NEW HOPE DAIRY(002946)：Q4 EARNINGS GROWTH ACCELERATES WITH LOW-TEMPERATURE PRODUCTS CONTINUING TO EXCEL

Key takeaway In 2025, the company will focus on the low-temperature product category, expand into emerging channels, and drive growth through product innovation. Strategic products performed exceptionally well throughout the year, with frequent bestsellers in new retail channels like Sam's Club, contributing to double-digit growth in the low-temperature category― particularly in premium fresh milk and specialty yogurt segments. The product structure was optimized and upgraded, with the gross profit margin increasing by 0.82 percentage point to 29.18%. Additionally, impairment and non-operating losses decreased, driving a 1.47 percentage point increase in the annual net profit margin. Looking ahead to 2026, we anticipate continued growth in the low-temperature product category and gradual stabilization in the room-temperature category. The low-cost advantage of raw milk and product mix upgrades will drive gross margin expansion, while impairment items are expected to further decline. We are confident in achieving the "Five-Year Plan period" target of doubling the profit margin ahead of schedule this year. Event The company released its 2025 annual report. In 2025, the company reported operating revenue of RMB 11.233 billion, up 5.33% year-on-year; net profit attributable to the parent company of RMB 731 million, up 35.98% year-on-year; and non-GAAP net profit attributable to the parent company of RMB 774 million, up 33.76% year-on-year. In Q4 2025, the company reported operating revenue of RMB 2.800 billion, up 11.28% year-on-year; net profit attributable to shareholders of RMB 108 million, up 69.29% year-on-year; and adjusted net profit attributable to shareholders of RMB 127 million, up 76.99% year-on-year. Quick Take Low-temperature performance remains outstanding, with structural upgrades boosting growth momentum. In 2025, the company continued to focus on the low-temperature product category, maintaining its "dual strength in fresh and yogurt" development strategy while increasing product innovation. Both low-temperature fresh milk and low-temperature yogurt achieved double-digit growth. Premium fresh milk and the "Today's Fresh Milk" line also saw double-digit growth, with specialty yogurt growing over 30% year-over-year, particularly the Huorun product line. In terms of room-temperature products, the company continued to optimize its business strategy. Xiajin products were introduced to Sam's Club, and raw milk was supplied to Cotti Coffee, with the overall decline expected to narrow. The company continued to focus on launching new products. Sam's Club customized items such as guava yogurt, caramel pudding, and Juepin performed exceptionally well in monthly sales. The Huorun Light Meal Bottle maintained strong momentum in health-focused and functional product development. Throughout the year, new products consistently contributed over 10% of total revenue. By category, liquid milk revenue in 2025 reached RMB 10.495 billion, up 6.70% year-on-year, while milk powder revenue was RMB 87 million, up 21.56% year-on-year. In terms of channels, the self-service subscription business enhanced delivery efficiency, the "milk tapping" at flagship stores met the personalized demands of young consumers, and the DTC model's share continued to rise steadily. Sam's Club and other new retail customizations are fully committed to developing multiple best-selling products. In 2025, the proportion of direct sales channels rose to 63.77% (a year-on-year increase of 5.40 percentage points). Direct sales revenue reached RMB 7.163 billion, up 15.07% year-on-year, while distribution revenue stood at RMB 3.418 billion, down 7.17% year-on-year. Annual e-commerce revenue reached RMB 1.235 billion, representing a year-on-year increase of 6.43%. Looking at the company's annual performance by region, the Southwest, East China, North China, Northwest, and other regions generated revenues of RMB 3.830 billion, RMB 3.524 billion, RMB 918 million, RMB 1.266 billion, and RMB 1.695 billion, respectively, with year-over-year changes of +0.05%, +14.95%, -0.50%, +0.0%, and +7.14%. Low-priced milk and product mix drive gross margin improvement, with net profitability continuing to strengthen. In 2025, the company's gross margin was 29.18%, up 0.82 percentage point year-over-year, while the net profit margin attributable to the parent company was 6.51%, up 1.47 percentage points year-over-year. In Q4 2024, the gross margin was 28.31%, up 2.32 percentage points year-over-year, and the net profit margin attributable to the parent company was 3.87%, up 1.33 percentage points year-over-year. In terms of gross margin, on the one hand, milk prices will be at the bottom of the cycle in 2025, optimizing raw material costs; on the other hand, the company is optimizing its structure to increase the proportion of higher-margin low-temperature products and direct sales channels, with high-end fresh milk and high-end yogurt showing impressive revenue growth. In 2024, the gross margin for direct sales channels was 31.31% (+0.01 pct), while the gross margin for distribution channels was 29.15% (+1.58 pcts). On the expense side, the selling expense ratio in 2025 is 16.11%, up 0.55 percentage point year-on-year, whilethe administrative expense ratio is 3.18%, down 0.39 percentage point year-on-year. In 2025, the company's promotion and advertising expenses were RMB 947 million (+8.8%) and RMB 316 million (+30.08%), respectively. In terms of administrative expenses, the administrative expense ratio decreased by 0.39 percentage point to 3.18% in 2025. Focusing on the five-year plan and advancing the implementation of the "Fresh Strategy," the target of doubling the net profit margin may be achieved ahead of schedule. In 2025, the company will continue to adhere to the principle of "upholding core values and fostering long-term growth," concentrating on strategic sectors, actively exploring secondary growth opportunities, implementing strategies more effectively, strengthening core competencies, and striving for sustained revenue growth alongside improved net profit margins. This will propel the company into a new phase of high-quality, sustainable development. In 2023, New Hope Dairy unveiled its "Five-Year Strategy" with the goal of "expanding and strengthening core businesses, enhancing corporate value, and doubling net profit margins within five years." Aligning with this strategy, the company has delivered outstanding performance and is on track to achieve the net profit margin doubling target ahead of schedule by 2026. Additionally, the share of low-temperature products continues to rise, with product innovation remaining a key driver of the company's growth. Earnings forecast: The company is expected to generate revenues of RMB 12.057 billion, RMB 12.955 billion, and RMB 13.908 billion in 2026-2028, with net profits attributable to shareholders of RMB 884 million, RMB 1.072 billion, and RMB 1.254 billion, corresponding to EPS of 1.03, 1.25, and 1.46 yuan, and P/E multiples of 17.33X, 14.29X, and 12.22X, respectively. Risks 1. Food safety: Food safety is always the focus of consumers. Although the company has continuously improved production quality control levels, since it involves many links and enterprises, there are still food quality and safety risks. 2. Risk of rapid increase in raw milk prices: Direct materials account for a relatively high proportion of dairy production costs, with raw milk and milk powder comprising a significant portion. In recent years, major raw milk importing regions have gradually reduced their production capacity. Combined with persistently high feed costs, any unexpected increase in raw milk prices could negatively impact corporate profitability. 3. Risk of intensified industry competition: In recent years, domestic dairy consumption has remained relatively weak. To maintain market share, brands have significantly increased spending, leading to frequent price competition. Without effective business strategies, the company may face risks such as declining market share, deteriorating operating performance, and slower growth. 【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

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