Third-quarter e-commerce revenue fell approximately 36% year on year, konjac growth stalled, and higher packaging and imported surimi costs squeezed gross margin. Goldman Sachs expects channel and cost pressures to ease gradually, but has lowered its earnings forecasts for the next three years and its target price.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs expects Yanjin Shop to return to growth as channel adjustments end, new products are introduced and costs improve, but has lowered its earnings forecasts while maintaining a Buy rating as near-term sales and profits remain under pressure.
Why was third-quarter growth under pressure?
Yanjin Shop’s third-quarter net profit came in below Goldman Sachs’ expectations, mainly due to weaker sales and gross margin. Offline sales grew 3% year on year, but e-commerce revenue fell approximately 36% and wholesale channel adjustments also weighed on overall performance.
Revenue from the core konjac category was roughly flat year on year in the first three quarters. Meanwhile, quail egg and seafood snack sales grew by more than 50% and 30%, respectively, in the third quarter, and some other categories also returned to growth.
When might the channel adjustments end?
The traditional wholesale channel is shifting from small distributors to large distributors. Management said the onboarding of large distributors is proceeding normally, but expansion of sales outlets has been delayed. The company expects the adjustment to be largely completed by the end of 2026 and will monitor the recovery through performance in December.
After spending on e-commerce was reduced, third-quarter revenue still fell approximately 36% year on year, but the channel’s net margin improved markedly. Management expects e-commerce to bottom out in 2027 and gradually recover. Revenue from the discount snack store channel grew steadily in the third quarter, accounting for approximately 40% of company revenue, while the channel’s net margin showed no significant change.
Goldman Sachs expects adjustment pressures to continue into the fourth quarter, with revenue and net profit for the quarter growing 1% and 6% year on year, respectively, and net margin at approximately 11.2%, above 10.5% in the third quarter and 10.8% a year earlier.
How might profit pressures ease?
Third-quarter packaging costs rose nearly 10% year on year, while imported deep-sea fish surimi costs rose 40%, weighing on gross margin. Konjac procurement prices have begun to fall, but the benefit had not yet been reflected in the third quarter. Management expects the cost benefit to emerge gradually from the fourth quarter through 2027.
The company also made a concentrated accrual in the third quarter for supplementary social insurance contributions covering the first three quarters, affecting profit by approximately 10%. Management does not expect a similar concentrated one-off impact in the future.
Brand building and investment in the wholesale channel pushed up the selling expense ratio in 2026. The company expects total selling expense spending in 2027 to be broadly similar to 2026. Management expects the overall net margin to improve in 2027, with a medium- to long-term target of 15%.
Why did Goldman Sachs cut forecasts while remaining positive on a recovery?
Channel adjustments, slowing konjac growth, higher surimi prices and brand investment prompted Goldman Sachs to cut its net profit forecasts for 2026–2028 by 14%–24%. The bank lowered its 12-month target price from 56 yuan to 48 yuan and maintained its Buy rating.
Drivers of the recovery include new spicy konjac products and deeper channel penetration, as well as expansion in quail eggs and seafood snacks. The first and second phases of quail farming are operating at full capacity; the third phase is expected to begin production in the first half of 2027 and gradually ramp up. A fourth product is being jointly developed for the membership-store channel.
Goldman Sachs forecasts 2027 revenue of 6.332 billion yuan, up approximately 7.6% year on year, and net profit attributable to the parent company of 808 million yuan. The new forecasts are below its previous revenue forecast of 6.757 billion yuan and net profit forecast of 977 million yuan.
