Qiaqia Food: Lower sunflower seed costs support recovery, while nut costs weigh on earnings forecasts
Third-quarter profit fell short of Goldman Sachs’ expectations, prompting it to lower its earnings forecasts for 2026–2028. Lower sunflower seed procurement prices and earlier shipments ahead of the Spring Festival should support subsequent performance, but nut costs and diverging trends across established and newer channels continue to limit the recovery.
Original source：Goldman SachsFirst published on Unhidea：Original source date：
Key takeaway
Goldman Sachs maintains its Buy rating based on lower sunflower seed costs, sales recovery and shareholder returns, but its earnings forecast cuts indicate that nut growth remains difficult to translate fully into profit growth.
Why were earnings forecasts lowered despite further gross margin improvement?
Qiaqia’s net profit for the third quarter of 2026 fell short of Goldman Sachs’ expectations because of weaker sales and a higher tax rate, despite continued gross margin expansion. Operations are recovering, but sales and the tax burden have weakened the recovery’s transmission to net profit.
Taking sales and nut cost pressures into account, Goldman Sachs lowered its 2026–2028 forecasts for net profit attributable to shareholders by 7.8%, 6.4% and 3.6%, respectively, to 617 million, 675 million and 731 million yuan. For 2027, revenue is expected to grow by about 5% and profit by about 9%. The recovery case remains intact, but its strength is below previous estimates.
How much profit upside can lower sunflower seed costs provide?
Management said favorable weather and broadly stable output led to a slight year-on-year decline in prices for bulk sunflower seed procurement, which began in late October. Procurement will continue until the Spring Festival, and final costs will vary with the market; upgrades in raw material quality and a higher share of premium products will also offset some of the savings.
Goldman Sachs’ channel checks show that sunflower seed prices fell 20% year on year and 8% month on month during October 1–16. Its 2027 base case assumes a 2% year-on-year increase in the average selling price and a 6% decline in raw sunflower seed costs. If the selling price assumption remains unchanged and the cost decline widens to 15%, the overall gross margin could rise from 26.2% to 27.6%, an increase of 1.4 percentage points.
Nuts are a countervailing force: some raw material prices remain high, and the company prioritizes absorbing costs internally, considering only selective, modest price increases. Goldman Sachs cut its 2027 nut gross margin forecast from 22% to 19%, corresponding to 14% growth in nut revenue but an approximately 1% decline in gross profit. Faster growth does not mean a matching increase in profit contribution.
As fourth-quarter growth accelerates, how much comes from shipment timing and channel changes?
Changes in the timing of Spring Festival stocking are expected to increase peak-season shipping days in December 2026 by 5–10 year on year and reduce them by 5–10 in January 2027. This supports fourth-quarter revenue recognition but will also depress sales in the following first quarter, especially in January. Goldman Sachs expects fourth-quarter revenue and net profit to rise 11% and 52% year on year, respectively, including a benefit from earlier shipments.
Growth in the discount snack retail channel comes from store expansion and new products: sales exceeded 130 million yuan in September, while normal monthly sales excluding holiday stocking were 80 million–90 million yuan. Membership stores and Freshippo also performed well, but traditional offline distribution was flat to slightly down in the third quarter, making the overall recovery uneven.
E-commerce revenue grew by a low-teens percentage year on year in the third quarter, but high platform fees left the online business slightly loss-making. The company plans to improve profitability through its product mix, new online-exclusive products and self-run livestreaming; channel expansion still has to clear the hurdle of translating into profit.
Why does Goldman Sachs maintain its Buy rating after cutting earnings forecasts?
Goldman Sachs values the sales recovery, the potential for lower sunflower seed costs in 2027, and the defensive qualities provided by continued shareholder returns. Management has set a net margin target of 8%–10% for the fourth quarter of 2026 and for 2027; achievement depends on demand, raw material costs and gross margin trends.
The target price rose slightly from 21.5 yuan to 21.7 yuan, mainly because the valuation benchmark rolled forward from 2026 to 2027, while retaining a forward price-to-earnings multiple of 16 times. The target price increase occurred alongside the earnings forecast cuts, reflecting the change in valuation year.
