In January 2021, CHINA FEIHE (06186) reached its peak share price since listing, hitting an intraday high of HK$25.7, corresponding to a total market capitalization of HK$229.5 billion, also the company's historical market value peak. As of the close on September 24, 2026, its share price had fallen to approximately HK$2.575 per share, down more than 90% from the 2021 high of about HK$26, with market value evaporating by over HK$100 billion. (Source: Wind Information)
Bank of America Securities slashed its target price from HK$3.7 to HK$2.4, downgrading the rating to "Underperform"; Citi lowered its rating to "Sell" with a target price of HK$2.5. Investors are voting with their feet as market value evaporates substantially and institutions cut ratings and target prices sharply. Why is Feihe, once regarded by value investors as the "Moutai of the milk powder industry," no longer favored? The company's overall performance has fallen into decline, and the weak outlook for its core infant formula business may be the core reason.
In the first half of 2026, CHINA FEIHE reported revenue of RMB 9.362 billion, up only 2.3% year-on-year, while net profit attributable to shareholders plunged 16.3% year-on-year to RMB 837 million — a classic case of "revenue growth without profit growth." More alarming to the market is that Feihe's core infant formula business generated revenue of RMB 8.09 billion in the first half, down another 1.3% year-on-year, marking six consecutive quarters of negative growth. As the core category continues to shrink and new businesses have yet to form effective profit contributions, Feihe's long-term value anchor is being reassessed by the market.
Core infant formula business faces intensifying competition and continued pressure, with both Xingfeifan and Zhuorui revenues declining. In recent years, CHINA FEIHE's operating performance has been far from optimistic. In 2025, CHINA FEIHE saw a double decline in performance, with full-year operating revenue of RMB 18.113 billion, down 12.7% year-on-year, and net profit attributable to shareholders of RMB 1.939 billion, plunging 45.68% year-on-year. Under these circumstances, the company's overall performance in the first half of 2026 did not show significant improvement. In the first half of 2026, CHINA FEIHE reported revenue of RMB 9.362 billion, up only 2.3% year-on-year, while net profit attributable to shareholders plummeted 16.3% year-on-year to RMB 837 million.
Even more concerning is the revenue trajectory of the company's lifeline — infant formula — which looks particularly grim, with expectations for sustained future growth severely lacking. The "involution" in the infant formula market has far exceeded the scope of normal competition. First, the industry's overall pie continues to shrink — data from the National Bureau of Statistics shows that China's birth population in 2025 was 7.92 million, a decrease of 1.62 million year-on-year. This figure simultaneously fell below both the 9 million and 8 million expectation thresholds, setting the lowest record since 1949. Meanwhile, according to Frost & Sullivan data, the number of infants aged 0-3 in China dropped from approximately 41.9 million in 2020 to about 26.5 million in 2025, shrinking by about 37% (precisely 36.7%) over five years.
The cake is shrinking, but the number of people fighting for it is increasing. Yili, with its "Jinlingguan" brand, firmly holds the number one position nationwide with an 18.6% retail sales market share, and in April 2026 explicitly proposed the goal of "number one single-brand market share," directly targeting Feihe's dominant position. Biostime's first-half sales surged 58% year-on-year, and Mead Johnson achieved double-digit growth for 12 consecutive quarters. The battle for share among leading brands has entered a zero-sum game.
CHINA FEIHE's infant formula business continues to face pressure, with revenue from 2021 to 2025 showing a trajectory of "surge — decline — brief rebound — another deep plunge." After peaking at RMB 21.515 billion in 2021, revenue declined for two consecutive years to RMB 19.932 billion and RMB 17.877 billion in 2022 and 2023, with year-on-year declines of 7.40% and 10.30% respectively; in 2024, it briefly recovered to RMB 19.062 billion with 6.60% year-on-year growth thanks to ultra-premium products, but in 2025 it fell sharply again by 16.80% to RMB 15.868 billion, hitting a five-year low. Over five years, revenue cumulatively decreased by RMB 5.647 billion, a shrinkage of about 26.2%. Although the decline narrowed to 1.3% in the first half of 2026, revenue remains at a low level, and the foundation for stabilization is not yet solid.
According to Huachuang Securities data, CHINA FEIHE's classic products Xingfeifan and Zhuorui are both expected to see revenue declines, mainly due to the phased weakening of channel push from earlier price strategy adjustments, combined with some existing consumers upgrading to the ultra-premium Shuangcui series. CHINA FEIHE's differentiated positioning of "more suitable for Chinese babies' constitution" has become difficult to build into an absolute competitive barrier after the industry shifted into a stock competition game.
In the first half of 2026, selling and distribution expenses further increased to RMB 3.425 billion, up 7.9% year-on-year. The company explicitly attributed the increase to proactively ramping up advertising investment to counter Yili's "Jinlingguan number one single-brand market share" goal. However, this strategy of trading expenses for share is facing diminishing marginal returns — in the first half, an extra RMB 250 million in selling expenses only bought RMB 210 million in revenue growth. Expense growth continues to outpace revenue growth, reflecting that under the dual squeeze of shrinking demand and intensifying competition, Feihe's marketing investment has shifted from a growth engine to a heavy burden on profits. (Source: Company announcements)
Feihe's hidden ailment: missing second curve, new businesses have volume but no profit. Receivables surge 47.7%, both distributors and retail outlets decline. If the decline of the core business is Feihe's "visible wound," then the absence of a second growth curve and the continuous deterioration of channel relationships are deeper "hidden ailments." Over 86% of CHINA FEIHE's revenue still depends on the single infant formula category, and the much-anticipated "full life-cycle nutrition" strategy has yet to deliver effective performance succession. In 2025, new business revenue was RMB 2.06 billion, with growth of 36.1%, but its revenue share was only 11.4%, and gross margin was merely 1%, placing it in a typical "volume without profit" investment phase.
In the first half of 2026, external sales of raw milk surged from RMB 7.8 million to RMB 146 million, but its share of revenue was only 1.56%; overseas business revenue was approximately RMB 130 million, accounting for just 1.4%. These figures are still a considerable distance from the vision of a "certain second growth curve." In addition, CHINA FEIHE's accounts receivable data also deserves attention. As of June 30, 2026, Feihe's trade receivables and bills receivable balance reached RMB 5.563 billion, up 47.74% from RMB 3.740 billion at the end of 2025. Meanwhile, revenue growth in the same period was only 2.3%. The huge contrast between the two may lie in the fact that a considerable portion of Feihe's approximately RMB 212 million revenue increment in the first half did not come from a genuine recovery in end demand, but was "credited" by relaxing credit terms for distributors.
Under the pressure of stock competition, CHINA FEIHE's bargaining power over downstream distributors is weakening — the past strong position of "payment first, goods later" is being replaced by the compromise of "goods first, payment later." The cost of this compromise is directly reflected in the increasingly tense relationship between Feihe and its distributors. The "deep distribution" model that Feihe relied on for success in the past was centered on distributors being able to obtain substantial and stable profit margins, but this profit foundation is being eroded by multiple forces. Feihe's RMB 1.2 billion maternity subsidy program launched in 2024 triggered industry-wide follow-up, with large amounts of subsidized milk powder flowing into gray channels and being dumped on second-hand platforms at 60% off or even lower, directly impacting the price system of legitimate channels.
At the same time, CHINA FEIHE's large-scale digital control measures of "electronic fencing + scan-code activities" implemented since 2023, while technically blocking cross-region diversion paths, also triggered strong backlash from some distributors. A county-level distributor who once tried to represent Feihe products told media that Feihe was "too remote, too strict," and after failing to meet the cooperation threshold, could only turn to the diversion market. In the first half of 2026, CHINA FEIHE's number of offline distributors had decreased from more than 2,800 at the end of 2025 to more than 2,600, and the number of retail outlets also dropped from over 70,000 to approximately 67,000. The net loss of channels itself is a silent expression of distributors voting with their feet.
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