New Dairy's net profit increased by over 30% year-on-year last year. Why does its strong performance still fail to alleviate market concerns? | Earnings Report Analysis

Caixin News, March 22 — (Reporter Zhu Wanping) By reducing management expenses and increasing investment returns, local dairy company Xinruye (002946.SZ) achieved a net profit growth of over 30% last year, outpacing market expectations, despite revenue increasing by approximately 5.33%. The company plans to distribute a cash dividend of 3.8 yuan per 10 shares to all shareholders in 2025.

Tonight, Xinruye announced that last year, the company achieved operating revenue of 11.233 billion yuan, a year-on-year increase of 5.33%; net profit attributable to shareholders of the listed company was 731 million yuan, up 35.98%; net profit after non-recurring gains and losses was 774 million yuan, up 33.76%; and net operating cash flow was 1.51 billion yuan, a rise of 1.26%.

Quarterly, the performance in Q4 was particularly impressive, with revenue achieving double-digit growth and net profit attributable to the parent increasing by 69% year-on-year, significantly outperforming the industry average. Additionally, the company’s net profit margin on sales increased to 6.72%, up 1.57 percentage points year-on-year. As of the end of last year, the company’s asset-liability ratio was 56.51%, down 8.10 percentage points from the beginning of the year.

By product, last year, sales of the company’s core products—cold fresh milk and cold yogurt—both achieved double-digit growth, with specialty yogurt sales increasing by over 30% year-on-year. The higher-margin cold product category’s proportion increased, becoming a key factor in profit improvement. By channel, direct sales accounted for 63.77% of revenue, a year-on-year increase of 15.07%; however, revenue from distribution and other channels declined by 7.17% and 14.01%, respectively.

Despite the strong performance, market concerns remain. On March 11, after Xinruye announced plans to list H-shares, the stock price plummeted 9.21% that day, and several core worries in the market continue to ferment. Although the company’s asset-liability ratio has decreased, at 56.51%, it remains relatively high in the industry, and doubts about its Hong Kong listing “raising capital” have not been fully alleviated.

Xinruye factory. Image source: Caixin News, photographer Zhu Wanping

In fact, the valuation of the dairy sector in Hong Kong stocks is currently low, and liquidity is weak. Against this backdrop, there is considerable uncertainty regarding Xinruye’s valuation and actual fundraising results from the Hong Kong listing.

Additionally, amid the recent widespread pressure on consumer stock prices, Xinruye has significantly increased its cash dividends to support its stock price. The company states that the total dividends for 2024 and the mid-term period will grow by 90% year-on-year. For 2025, the company plans to distribute 3.8 yuan per 10 shares, a roughly 52% increase.

Regarding the operational plan for 2026, Xinruye did not provide specific targets in its annual report, only stating that it will actively explore a second growth curve, deepen strategic implementation, and strive for sustained revenue growth and further improvement in net profit margin.

Sources from Caixin News learned that Xinruye’s revenue target for 2026 not only aims for continued growth but also to outperform the industry average, with a net profit margin goal of 8%–10%. Under multiple pressures such as rising raw milk prices and intensified industry competition, the realization of this performance target remains to be verified.