Zhongyin Babi Food Co.,Ltd. has found itself in a situation of increasing revenue without a corresponding rise in profits, due to reduced gains from its investment in Eastroc Beverage(Group)Co.,Ltd.
The company, known as the "first steamed bun stock," recently released its 2025 annual report. During the period, it achieved revenue of 1.859 billion yuan, a year-on-year increase of 11.22%. However, its net profit attributable to shareholders was 273 million yuan, a slight decrease of 1.28% compared to the previous year. After excluding non-recurring gains and losses, the net profit was 245 million yuan, representing a 16.66% year-on-year growth. Behind the steady revenue climb and improved profitability of its core business, fluctuations from a cross-sector equity investment nearly offset the entire year's incremental profit from main operations.
The root of this impact traces back to Babi Food's indirect shareholding in Eastroc Beverage. According to the company's 2020 IPO prospectus, Babi Food held a 5.71% limited partnership stake in the private equity firm Tianjin Junzheng. Before Eastroc Beverage's IPO, Tianjin Junzheng acquired 36 million shares, representing a 10% stake, making it the second-largest shareholder at the time. This translated to Babi Food indirectly holding a 0.571% stake in Eastroc Beverage.
This investment was once a positive contributor to Babi Food's performance. After Eastroc Beverage's A-share listing in 2021, its market capitalization gradually climbed to the hundred-billion-yuan level, contributing significant non-recurring gains to Babi Food for several consecutive years. From 2022 to 2024, the company's fair value change gains were 35.12 million yuan, 14.16 million yuan, and 91.16 million yuan, respectively, with fluctuations primarily influenced by the returns from the indirectly held Eastroc Beverage shares. Particularly in 2024, these related gains accounted for over 30% of the net profit attributable to shareholders that year, serving as a crucial engine supporting the company's earnings growth.
However, starting in 2025, due to stock price fluctuations of Eastroc Beverage in the secondary market, the combined fair value change gains and investment income generated from this investment decreased by 93.82 million yuan compared to the previous year. The former "performance engine" temporarily became a short-term drag, directly causing a slight decline in net profit attributable to shareholders.
It is noteworthy that Tianjin Junzheng has been continuously reducing its holdings of Eastroc Beverage shares since they became unrestricted. In the 2025 annual report, Tianjin Junzheng no longer appeared among the top ten shareholders of Eastroc Beverage, with its shareholding ratio falling below 1%. During the Q3 2025 earnings call, Babi Food explicitly stated that as its holdings of Eastroc Beverage shares decrease, the impact of fair value profit and loss changes on net profit would gradually diminish.
Setting aside the short-term disturbances from the equity investment, the development of Babi Food's core business remains relatively robust. Revenue growth is mainly driven by the expansion of its franchise and group meal segments. As a leading chain in Chinese breakfast, the company relies on franchising as its core sales channel. In 2025, this segment contributed revenue of 1.374 billion yuan, a year-on-year increase of 10.23%, accounting for over 70% of total revenue. By the end of the year, the total number of franchised stores had risen to 5,909, with a net increase of nearly 800 stores for the year.
However, the expansion of franchised stores was primarily fueled by brand integration, as the store closure rate was previously high. A CICC research report pointed out that, affected by an accelerated turnover rate in the catering industry, the number of closed Babi franchise stores in 2025 accounted for 21% of the previous year's store count, indicating a rising closure rate. Concurrently, the company completed acquisitions such as Nanjing's "Qinglu" and Zhejiang's "Manxiangren," accelerating regional integration. The number of newly added stores saw substantial growth, which ultimately drove the increase in the total number of franchised stores.
Furthermore, revenue from directly-operated stores (only 5), group meals, and other channels all experienced varying degrees of growth, showing a relatively stable development trend.
Since its founding in Shanghai in 2003, Babi Food has continuously deepened its presence in the East China market, building high brand recognition and becoming one of the preferred breakfast brands for local consumers. However, the company faces the challenge of a relatively slow nationwide expansion, with over 80% of its performance in recent years still coming from the East China region. In 2025, East China contributed 1.526 billion yuan in revenue, accounting for 82.08% of total revenue. This was followed by South China with revenue of 157 million yuan (8.46%), while Central China and North China generated 113 million yuan and 60 million yuan, respectively. Other regions combined contributed only 3.12 million yuan, reflecting a high degree of regional concentration.
Currently, competition in the Chinese breakfast bun and dim sum sector is intensifying. Babi Food faces a diverse competitive landscape: it competes with regional chain brands like Zaoyang, Laotaimen, and Sanjin Soup Buns; traditional mom-and-pop shops hold market share through flexible operations; and convenience store giants like 7-Eleven and FamilyMart, as well as餐饮 brands like McDonald's and KFC, have entered the breakfast segment. Furthermore, tea beverage brands such as Gu Ming, Naixue, and Mixue Bingcheng have crossed over into the market, further squeezing the competitive space.
To break through development bottlenecks, Babi Food is actively promoting business model innovation by rolling out a new store format focused on steamed soup dumplings (Xiaolongbao). Starting in July 2025, the company launched the new "Babi Handmade Xiaolongbao" store model, which can achieve average daily revenue twice that of traditional store formats. By the end of 2025, 24 such stores had been established nationwide, and the number of openings surpassed one hundred since the beginning of 2026. Babi Food plans to increase the number of these new Xiaolongbao format stores to over 600 by year-end, aiming for 700.
Comments