- Zixin's FY25 PATMI surged by 219.9% to RMB42.7mil, outperforming our expectations and accounting for 122% of our FY25e forecast. A 33% increase in revenue, a 2ppts improvement in gross profit margin, and a decline in other losses drove the strong growth. Sales of fresh sweet potatoes soared by 72% y-o-y to RMB99mil.
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- Zixin is also increasing marketing expenses to capture a greater market share and trading off margin for higher sales volume.
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The Positives:
Revenue surged by 33% y-o-y driven by across the board tailwind.
- Sales of processed products rose 24.1% y-o-y in FY25, supported by the launch of new items such as sweet potato crisps and fries, and a 20% ramp-up in capacity. We foresee sales of processed sweet potatoes improving as Chinese consumers become more health-conscious, and Zixin boosts its presence through increased marketing spend. With the new factory set to complete by 2H26, we expect sales volume to grow 33% y-o-y in FY26e.
- Zixin is also expanding its cold storage capacity by ~25% by 2H26, and we project volume to rise accordingly. However, the average selling price is anticipated to decline as sweet potatoes enter a bearish cycle in FY26e, following a 30% price increase in FY25.
- Sales of sweet potato seedlings soared 216% y-o-y to RMB1.2mil, as total cultivatable area doubled y-o-y in the FY25. With area estimated to expand from 200mu to 430mu, we anticipate sales under the Cultivation and Supply segment (fresh sweet potatoes and seedlings) to rise by ~27% y-o-y.
Improved gross margin by 2 ppts y-o-y.
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