Weilong Delicious Global Holdings, a prominent Chinese snack manufacturer, is poised to attract heightened investor attention following an anticipated profit surge in the first half of the year. As the economy slows, consumers are gravitating towards more affordable options, boosting Weilong’s performance. The company, based in Luohe, Henan province, projects a 34 to 39 percent increase in net profit year on year, estimating earnings between 599.1 million yuan (US$82.8 million) and 621.5 million yuan. This forecast was disclosed in a filing to the Hong Kong stock exchange on Thursday.
Weilong attributes this impressive growth to its “omnichannel construction and brand building,” which has significantly enhanced both online and offline revenue streams. Additionally, a decline in raw material costs has improved its gross profit margin. Morgan Stanley analysts noted that the lower cost and higher purchase frequency of snacks could provide consumers with a “small happiness” amidst the current economic challenges.
This optimistic outlook underscores the resilience of the snack sector, which appears to be outperforming other consumer staples categories as China’s economic growth slows. According to a recent McKinsey & Co report, consumers facing economic uncertainty tend to cut back on non-essential items like clothing, focusing instead on value and quality in their purchases.
China’s economic growth in the second quarter was a lower-than-expected 4.7 percent, impacted by weak consumption and declining property investment. Consumer prices also underperformed, rising only 0.2 percent year on year in June. This sluggish growth has affected luxury brands such as LVMH and Chow Tai Fook, with LVMH reporting a slowdown in sales growth in China to 1 percent in the second quarter from 3 percent in the previous quarter.
Despite the broader economic challenges, Weilong’s performance remains robust. A Morgan Stanley report highlights the company’s strong trajectory, with a 22 percent sales growth and a 23 percent net profit growth in the first half of the year. The report praises Weilong’s strong brand equity and rapidly growing vegetable products, suggesting that the company is well-positioned for continued growth over the next 12 months.
Swiss bank UBS also projects a favorable outlook for Weilong, expecting a revenue increase of over 20 percent in the second quarter due to declining costs in key agricultural products and packaging materials.
Weilong’s strategic positioning and strong market performance amidst economic uncertainty highlight its potential as a resilient player in China’s snack industry, offering both value and quality to its consumers.
READ MORE: