The conventional perception is that selling rice is a low-margin, volume-driven business. However, the latest 2025 financial results from SHIYUE DAOTIAN (HK:9676) are challenging this notion. On March 27, the company, which focuses on staple kitchen foods, disclosed its annual performance for 2025. During the year, the company's total revenue reached 6.81 billion yuan (Renminbi, same below), an increase of approximately 18.5% year-on-year. Net profit surged by 109.5% to 428 million yuan, while adjusted net profit rose by 60.3% to 560 million yuan. The dividend payout increased significantly compared to the previous year, with a proposed final dividend of 0.32 yuan per share (tax inclusive), representing about 60.4% of the adjusted net profit, up from 50.1% the year before. In a fiercely competitive traditional industry characterized by fluctuating raw material prices, these results demonstrate substantial value.

The company's business is straightforward, centered around rice and expanded to include corn, coarse cereals, legumes, and dried goods as staple kitchen foods. It operates three main brands: "SHIYUE DAOTIAN," "CHAIHUO DAYUAN," and "FUXIANG RENJIA," targeting mass market, mid-to-high-end, and value-for-money consumer segments, respectively. In 2025, the company's profitability improved markedly. The gross profit margin increased to 19.9% from 17.7% in the same period last year, and the adjusted net profit margin rose to 8.2% from 6.1%. For a sector where raw material costs constitute a significant portion and the average industry gross margin typically hovers between 10% and 15%, such profit performance is notably strong.

The enhancement in profitability stemmed from a dual effect of "one increase and one decrease." The "increase" refers to the success of the premiumization strategy. In recent years, SHIYUE DAOTIAN has continuously optimized its product mix, increasing the proportion of mid-to-high-end products. It has cultivated several core products with annual sales exceeding 100 million yuan, such as Hanlu Qiuxiang Wuchang Rice, Long-Grain Fragrant Rice, and Yellow Glutinous Corn. The growth rate of its premium brands has been significantly higher than the overall growth, driving the overall gross margin upward. Simultaneously, the company enhanced refined operations in its online channels, reducing inefficient promotions, which further stabilized its pricing system. The "decrease" pertains to the benefit from lower raw material costs. Rice raw material prices declined year-on-year during certain periods in 2025, providing some relief on the cost side. However, it is noteworthy that prices for the new season rice have shown an upward trend. In preparation for 2026 operations, the company significantly increased its raw material inventory, leading to a 53.4% year-on-year surge in inventory to 2.087 billion yuan. Concurrently, due to increased raw material purchases, the company's cash and bank balances decreased by 39.8% to 429 million yuan as of December 31, 2025.

If the gross margin improvement reflects selling "smarter," then changes in the product category structure reveal selling "broader." SHIYUE DAOTIAN's core business remains solid. Rice, as the core category, maintained steady revenue growth (up 18.4% year-on-year) and continued to lead in market share within online channels. However, the real growth driver was the explosive performance of innovative categories. These categories have become new growth engines for the company. In 2025, revenue from coarse cereals, legumes, and other products grew by 36.0% year-on-year, while revenue from dried goods and other products surged by 51.5%, making it the fastest-growing business segment. Conversely, revenue from corn products declined by 9.2%, attributed to adjustments in marketing spending and a principle prioritizing profit quality.

More noteworthy are the changes on the channel front. As a kitchen food brand that originated online, SHIYUE DAOTIAN has long benefited from a high online penetration rate. In 2025, the company maintained its leading position on traditional e-commerce platforms like JD.com and Tmall, while simultaneously scaling up its presence on emerging channels such as Pinduoduo, Douyin, and Kuaishou. Instant retail platforms like Meituan Flash Delivery and JD Daojia have also become new growth points.

In the current landscape of increasingly distinct consumer stratification, a single brand can hardly cater to all demographics. SHIYUE DAOTIAN's multi-brand strategy aptly addresses this trend. The flagship brand "SHIYUE DAOTIAN" targets the mass market and serves as the company's revenue anchor. "CHAIHUO DAYUAN" focuses on the mid-to-high-end segment, emphasizing quality labels like "Wuchang Rice" and "organic," and is the main driver behind the gross margin improvement. "FUXIANG RENJIA" concentrates on value-for-money, meeting the needs of more price-sensitive consumers. These three brands, each with distinct focuses, form a comprehensive and complementary product matrix. Whether consumers seek to "eat better" or "get better value," they can find suitable options within SHIYUE DAOTIAN's ecosystem. The effectiveness of this brand architecture is particularly evident in the repurchase rate. According to the company's previous prospectus, based on 2022 sales data from JD.com, the repurchase rates for rice, coarse cereals, legumes, and seeds under the SHIYUE DAOTIAN and CHAIHUO DAYUAN brands were higher than the industry average. In the food and beverage industry, a high repurchase rate indicates that the brand has established strong user loyalty and trust barriers, which are among the core moats for consumer goods companies.

Looking ahead from the perspective of the 2025 annual report, key areas to watch for SHIYUE DAOTIAN's growth include: 1) Further potential for increasing online penetration. Although the company is already a leading player in the online rice category, the overall online penetration rate for staple kitchen foods remains relatively low. With the proliferation of new retail formats like instant retail and community group buying, SHIYUE DAOTIAN is poised to benefit from incremental opportunities driven by evolving channel structures. 2) Continued scaling on emerging channels. The food category on platforms like Pinduoduo, Douyin, and Kuaishou is still experiencing rapid growth. Leveraging its mature supply chain and brand recognition, SHIYUE DAOTIAN has the capability to further expand its market share on these platforms. 3) The explosion of new categories is just beginning. The success in the corn category validates the company's ability to transition from a "rice expert" to a "staple kitchen food platform." Similar growth stories are likely to be replicated across other categories like coarse cereals, legumes, and dried goods in the future.

Of course, challenges remain and cannot be overlooked: Rising prices for new season rice may exert pressure on costs; industry competition is intense, with both traditional brands and new consumer brands increasing their efforts; and inventory and cash flow management require more refined approaches.