In late August, Qingdao Richen Food Co.,Ltd. (SH: 603755) disclosed share reduction plans from three senior executives. Directors Cui Baojun, Chen Ying, and Sui Xidang intend to sell up to 116,000 shares combined, representing no more than 0.12% of total share capital, over the next three months via centralized bidding. Based on the closing price of 24.07 yuan per share on September 17, the total value of these planned reductions amounts to roughly 2.8 million yuan, with the stated reason being personal capital needs.
The same day the reduction notice was published, the company unveiled a mixed first-half report. Revenue reached 237 million yuan, up 16.25% year-on-year, while net profit attributable to shareholders declined 16.54% to 29.41 million yuan. The profit pressure primarily stems from multiple factors, including higher depreciation and operating costs following the commissioning of the Jiaxing factory.
More notably, product mix performance has shown divergence. In the second quarter, both the core sauce-based seasoning line and the newly added bakery business faced growth headwinds.
Powder-based growth cannot mask sauce-based weakness
Looking at product breakdown, sauce-based seasonings generated revenue of 151 million yuan in H1, up just 3.22% year-on-year. Powder-based seasonings reached 59 million yuan, growing 29.98%. Bakery food products contributed 25.57 million yuan in revenue, while food additives declined 10.39% to 1.15 million yuan.
By channel, food processing led with a 39.77% year-on-year growth rate. Restaurant channels grew 13.90% to 110 million yuan. Clearly, H1 revenue expansion was driven primarily by powdered products and the food processing channel.
Notably, powder-based seasonings still account for less than 30% of total revenue, making sauce-based seasonings the company's crucial income source. However, in Q2, sauce-based seasoning revenue came in at 69.47 million yuan, up a mere 0.7% year-on-year, significantly trailing the 46.3% growth of powder-based seasonings.
The company's restaurant clientele consists mainly of chain operators. Sauce-based products are primarily used for standardized dish flavoring, with demand closely tied to actual meal volumes at restaurant locations. In Q2, restaurant channel revenue slipped approximately 15.3% to 41.66 million yuan, directly dragging down overall sauce-based product performance. By contrast, growth in powder-based products mainly originates from food processing clients with lower exposure to dine-in scenarios, insulating them from the restaurant segment's slowdown.
Industry data from Guohai Securities indicates Q2 catering retail sales growth remained subdued due to weather factors, with the sector in a weak recovery phase. Among listed seasoning companies, Hai Tian Wei Ye, Qianhe Weiye, Zhongju Hi-Tech, and Teway Food all saw sequential revenue declines in Q2.
The newly acquired bakery division also underperformed in H1. In March 2025, Qingdao Richen Food completed its acquisition of Ai Beibang, a supplier of frozen dough products to bakery enterprise clients. The bakery segment posted 25.57 million yuan in H1 revenue, with Q2 alone contributing 9.14 million yuan, down 12.9% year-on-year.
Ai Beibang, as a supplier primarily serving bakery businesses, sees its revenue directly tied to downstream bakery store operating conditions. Although the frozen bakery segment has grown rapidly in recent years, downstream bakery store contractions have pressured growth for several players. Besides Qingdao Richen Food, LIGAO FOODS' frozen bakery revenue grew just 0.97% in H1, while Namchow Food's pre-made bakery business grew 19.83% in Q2, below the prior year's 24.73% pace.
Profit pressure remains near-term challenge
H1 revenue growth failed to translate into profit gains. Q1 net profit attributable to shareholders rose 3.02% to 18.20 million yuan, but Q2 reversed sharply, with quarterly net profit down 36.21% to 11.21 million yuan.
The company attributes the profit decline to three primary factors. The foremost is higher depreciation and operating costs from the Jiaxing factory. The initial public offering-funded project for an annual 15,000-ton compound seasoning production base, located at the Jiaxing facility, was largely completed in 2025 and began operations during the reporting period. Consequently, administrative expenses climbed 32.29% year-on-year to 22.30 million yuan in H1.
Second, the equity-method investment in Oriental Jinxin recognized a 2.44 million yuan investment loss during the reporting period, further eroding profitability. Third, the increased proportion of low-margin Ai Beibang frozen dough business diluted overall gross margins, which fell 2.54 percentage points to 35.73% in H1.
Among these three factors, the first two are structural and phase-related in nature, though the pace of capacity ramp-up and whether investment losses narrow remain uncertain in the near term. Compared with listed seasoning peers, Qingdao Richen Food's gross margin trails that of Qianhe Weiye (39.45%), Hai Tian Wei Ye (41.04%), Teway Food (42.32%), and Zhongju Hi-Tech (42.79%).
Qingdao Richen Food's core model centers on providing customized ODM compound seasoning services to large B-end clients, with B-end channel revenue accounting for over 90% of sales. This model's advantages include strong customer stickiness and stable gross margins, as customized products embedded in client supply chains create high switching costs, eliminating the need for massive marketing expenditures typical of C-end brands.
However, the model's limitations are equally pronounced. High customer concentration means client operational fluctuations transmit directly to company revenue. Downstream price competition in the restaurant industry inevitably pressures upstream suppliers, compressing profit margins. More critically, while Qingdao Richen Food's gross margin ranks mid-to-upper tier within the B-end customization space, it cannot match companies like Hai Tian Wei Ye and Zhongju Hi-Tech that focus primarily on C-end standardized products. The latter benefit from natural advantages in brand premium and large-scale standardized production.
The company previously attempted to expand into the C-end market through its own brand "Wei Zhi Wu Yu," but results proved limited. During H1, revenue from direct supermarket channels, direct e-commerce, and retail distributors all posted negative growth, with each channel's revenue not exceeding 2.1 million yuan.
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