Net Income Plummets 80% to New Post-IPO Low, Nankang Food's Second Generation Takes Over Under Heavy Cost Pressure and Faces Growing Pains

Image Source: Visual China

Blue Whale News, March 12th (Reporter Dai Ziting) This listed company, known as the “No. 1 in Baking Fats,” is experiencing its most difficult year since going public.

On March 10th, Nanyou Food (605339.SH) released its “worst-ever” annual report: revenue of 3.065 billion yuan in 2025, down 2.99% year-over-year; net profit attributable to parent of 40.668 million yuan, down 79.81%; net profit excluding non-recurring gains and losses of 36.869 million yuan, down 79.80%; net cash flow from operating activities of 52.926 million yuan, down 77.14%. Despite only a slight decline in revenue, profits shrank by over 70%, exposing multiple pressures on this leading baking raw material company in costs, product structure, and channel competition.

On March 11th, the company also disclosed that its consolidated revenue for February 2026 was 198 million yuan, a decrease of 6.20% year-over-year, indicating ongoing operational pressure.

Profitability Under Pressure

According to the annual report, Nanyou Food’s core issue in 2025 is not revenue but declining profitability. The company’s main baking fats business had an overall gross margin of only 19.11%, a decrease of 4.98% from the previous year.

Breaking down by product, revenue from baking application fats was 1.405 billion yuan, down 8.86%, with a gross margin of 25.21%; fresh cream revenue was 515 million yuan, down 1.64%, with a gross margin of 23.54%; dairy product revenue was 639 million yuan, down 7.00%, with a gross margin of 12.61%; pre-made baked goods achieved 480 million yuan in revenue, a 26.49% increase, but with a gross margin of only 6.80%, a decline of 5.71% year-over-year. In other words, the fastest-growing business has not become a profit recovery driver; instead, due to high revenue, low gross margins, and declining gross margins, it cannot offset overall profit pressure.

Cash flow and accounts receivable are also concerning. The annual report shows that net cash flow from operating activities in 2025 was only 52.926 million yuan, down 77.14%; accounts receivable at year-end was 218 million yuan, higher than 199 million yuan in the same period last year. Rough calculations based on the annual report data suggest that this accounts receivable scale is about 5.35 times the net profit attributable to the parent that year, indicating that in the context of shrinking profits, collection and operational “cash generation” capacity are also under pressure.

Industry insiders told Blue Whale reporter that for a raw material-intensive manufacturing enterprise, such deterioration in indicators often means further compression of future operational flexibility.

Looking at a longer cycle, since listing on the A-share market in 2021, Nanyou Food’s profit fluctuations have been large, but 2025 is undoubtedly its worst annual report since going public. The above industry insider pointed out that the profit decline far exceeds the revenue decline, indicating that the company’s current challenges are not just demand fluctuations but also the result of cost shocks, product structure changes, and intensified channel competition.

Cost Pressures Hit, Strategic Adjustments Still Climbing

In its annual report, Nanyou Food explicitly states that one of the main reasons for profit pressure in 2025 is the year-over-year increase in prices of major raw materials, leading to higher production costs; secondly, the proportion of high-margin products like baking application fats declined, further squeezing overall gross margins. The report also shows that direct material costs for the baking fats business reached 1.98 billion yuan, accounting for 80.03% of the business’s costs. For a company relying heavily on raw materials, this means that every fluctuation in upstream raw material prices quickly transmits to the profit statement.

According to the annual report, the main raw materials for the company’s products are palm oil, soybean oil, coconut oil, and other oils. Blue Whale reporter found that globally, over the past two years, prices of palm oil and coconut oil have been volatile at high levels, with coconut oil prices rising more sharply. The World Bank’s commodity database shows that the average annual price of coconut oil rose from $1,075 per ton in 2023 to $1,519 in 2024, and further to $2,480 in 2025; the quarterly average price in Q3 2025 even reached $2,727 per ton.

In comparison, the average annual price of palm oil rose from $886 per ton in 2023 to $963 in 2024, and further to $1,007 in 2025, a smaller increase but still at a relatively high level. For Nanyou Food, which uses palm oil, coconut oil, and imported dairy fats, such high and volatile raw material prices are almost “all-around squeezing.”

Blue Whale reporter also noted that, when further breaking down to product level, the cost pressure is directly reflected in key products’ raw material structures. According to the 2025 annual report, key products in the fresh cream series include Qiao Yi 800 Fresh Cream, Qiao Yi Cream (cake-specific), Ji Yue Fresh Cream, Qiao Bai Le Liquid Cream, Vitré Liquid Cream, and Ai Yi Chun Liquid Cream. Among these, Qiao Yi Cream (cake-specific) explicitly uses fresh milk as the main raw material, while Ai Yi Chun is made from raw milk with 36% milk fat; the company’s definition of fresh cream itself is “mainly made from edible fats and dairy products.” Meanwhile, the core raw materials for pre-made baked goods are grain flour, fats, and water.

In other words, whether it’s cream products or pre-made baked goods, the upstream heavily depends on dairy, plant oils, and flour. When the costs of coconut oil, palm oil, imported dairy fats, and related dairy products rise, the production costs of these key products are directly pushed up, making gross margin pressure more tangible.

Nanyou Food also mentioned in its annual report that the gross margin decline of the fresh cream business is directly related to the continuous rise and record high prices of coconut oil and imported dairy fats; dairy product gross margins are under pressure due to rising procurement prices and unfavorable euro exchange rates. Although the company attempts to hedge costs through product price adjustments and structural changes, weak consumer recovery, increased price sensitivity downstream, and intensified channel competition mean that price hikes are below raw material increases, with lagging transmission, ultimately making cost pressures difficult to pass downstream smoothly.

In fact, rising raw material costs are not unique to Nanyou Food. Haorong Technology (300915.SZ) mentioned in its 2025 performance forecast that the significant increase in palm kernel oil prices directly raised production costs of products like milk fat plant-based butter, and combined with weak demand in traditional baking channels, pressured performance; Jiahua Food (605300.SH) also stated in its earnings forecast and investor relations activities that the prices of core oils like palm kernel oil and coconut oil have risen sharply, significantly increasing cost pressures. In other words, Nanyou Food’s performance slowdown reflects the broader profit “slippage” in the baking raw material sector amid high costs.

In response, Nanyou Food is accelerating adjustments. On one hand, the company continues to develop and produce dairy-related baking raw materials in-house, launching products like Qiao Bai Le Liquid Cream, Vitré Liquid Cream, Ai Yi Chun Liquid Cream, as well as self-developed fermented butter and fermented large butter. On the other hand, pre-made baked goods are still viewed as a second growth curve. However, the profitability of this curve is not stable. The annual report shows that while revenue from pre-made baked goods maintained double-digit growth, gross margins have fallen to 6.80%.

From an industry perspective, the baking market itself has shifted from rapid expansion to steady growth. The annual report cites Euromonitor data indicating that from 2020 to 2025, China’s baking industry CAGR was about 2.2%, significantly lower than 11.1% from 2010 to 2020; in 2025, China’s baking retail market size is approximately 259.5 billion yuan, expected to grow to 302.2 billion yuan by 2030.

Second-generation management takes over after the founder’s passing, with pay cuts and disclosure adjustments attracting attention

Compared to performance pressures, changes in governance are also noteworthy. In February, Nanyou Food announced that one of its actual controllers, Chen Feilong, recently passed away unexpectedly. The company stated that Chen Feilong was not employed by the company during his lifetime and that his passing would not have a significant impact on the company’s operations.

After Chen Feilong’s death, Nanyou Food’s actual control structure now includes Chen Zhengwen, Chen Yuwen, Chen Yuwen, and Chen Yongwen, with Chen Zhengwen serving as chairman and responsible for daily management. In other words, this family-oriented baking raw material company is entering a clearer “second-generation succession” stage, which coincides with profit pressures and intensified industry competition.

Notably, perhaps due to operational stress, the “second generation” management’s compensation has also shrunk. In 2025, Chen Zhengwen’s salary dropped from 4.4 million yuan in 2024 to 1.86 million yuan, a 58% decrease. The total management compensation fell from 13.65 million yuan in 2024 to 8.95 million yuan, about a 34% decline. In contrast, the number of employees remained stable, with per capita salary slightly increasing by 1.6% to 211,800 yuan.

Another market concern is the adjustment in information disclosure. The company recently announced that, since the indirect controlling shareholder Nanyou Investment Control will no longer disclose net profit data monthly starting January 2026, and considering that Nanyou Group’s listed companies generally maintain consistent external disclosures, the company plans to suspend related voluntary disclosures accordingly. The latest data shows that the consolidated revenue for February 2026 was 198 million yuan, a 6.20% decrease year-over-year. An industry insider told Blue Whale that, amid significant performance decline, reducing transparency in disclosures could raise investor concerns about financial transparency.

Facing severe challenges, Nanyou Food’s second-generation management is also trying to find breakthroughs through strategic adjustments. On the product side, the company actively develops dairy-related baking raw materials, launching products like Qiao Bai Le Liquid Cream, Vitré Liquid Cream, Ai Yi Chun Liquid Cream, as well as self-developed fermented butter and large fermented butter. On the channel side, it continues to optimize distribution, deepen domestic market penetration, and steadily expand overseas markets, with overseas revenue growing 13.41% year-over-year in 2025.

In the future, under the backdrop of changing baking consumption scenarios, rising raw material prices, and intensifying competition, whether Nanyou Food, as a leader in baking fats, can successfully break through will not only test management’s operational wisdom but also examine the resilience and adaptability of this family enterprise.