Jiangxi Huangshanghuang Group Food Co.,Ltd. recently announced its plan to acquire a controlling stake in Fujian Lixing Food Co., Ltd. (hereinafter referred to as "Lixing Food").
This marks the company's second acquisition attempt following the failed bid to acquire Zhancui Food in 2024. Currently, Jiangxi Huangshanghuang Group Food Co.,Ltd. faces challenges as its revenue has declined for four consecutive years and capacity utilization has dropped to a mere 23%, creating problems of idle capacity and declining profitability.
Notably, the acquisition target Lixing Food shows an evaluation appreciation rate of 252.58%, while its net profit exhibits significant volatility. The question remains whether this external expansion strategy can help the company overcome its current difficulties.
**High-Premium Acquisition by Jiangxi Huangshanghuang Group Food Co.,Ltd.**
According to the announcement, Jiangxi Huangshanghuang Group Food Co.,Ltd. plans to sign an equity transfer agreement with Lixing Food shareholders Lin Jieban, Hua'an County Shengxing Investment Partnership Enterprise (Limited Partnership), and Hua'an County Zhongli Investment Partnership Enterprise (Limited Partnership) to acquire a combined 51% stake for 495 million yuan. This values the entire company at 971 million yuan.
Established in 2006, Lixing Food specializes in research, development, and manufacturing of freeze-dried foods, primarily providing OEM/ODM contract manufacturing services. Its product portfolio includes fruits, vegetables, instant convenience foods, coffee, tea, premium beverages, dairy products, chocolate, infant foods, and plant extract powders and concentrates.
According to public information, Lixing Food achieved operating revenue of 415 million yuan and net profit of 42.22 million yuan in 2024. In the first half of 2025, it recorded operating revenue of 251 million yuan and net profit of 41.88 million yuan. As of June 30, 2025, the company's consolidated net assets attributable to shareholders totaled 277 million yuan, with an evaluated value of 978 million yuan, representing an evaluation appreciation rate of 252.58%. Based on 2024 performance data, the acquisition price-to-earnings ratio reaches 23 times.
The selling parties have committed that Lixing Food's audited non-recurring net profits for 2025, 2026, and 2027 will not be less than 75 million yuan, 89 million yuan, and 100 million yuan respectively, totaling 264 million yuan over three years with an average annual non-recurring net profit of no less than 88 million yuan. This implies net profit growth rates of 78%, 19%, and 12% from 2025 to 2027.
This acquisition potentially presents two concerns: first, the high appreciation rate creates goodwill impairment risks if Lixing Food fails to meet expectations due to industry conditions or operational factors; second, the significant profit volatility, with substantial growth promised for 2025 followed by notably slower growth thereafter, raises questions about sustained growth potential post-acquisition.
In fact, Jiangxi Huangshanghuang Group Food Co.,Ltd., facing declining performance growth, has been actively seeking acquisition targets.
In early December 2024, the company announced plans to acquire a controlling stake in Guangdong Zhancui Food Co., Ltd. using proprietary or self-raised funds. However, the acquisition was terminated shortly after due to inability to reach final agreement with the controlling shareholder on relevant terms.
Zhancui Food is a snack food research and deep-processing company producing nutritional foods, candies, preserved fruits, puffed foods, and biscuits, with 2022 sales of 553 million yuan.
In March 2023, Jiangxi Huangshanghuang Group Food Co.,Ltd. spent 111 million yuan to acquire an additional 27% stake in subsidiary Jiaxing Zhenzhen Laolao Food Co., Ltd., increasing its ownership to 94%.
Zhenzhen Laolao, a rice dumpling manufacturer, appears to represent an unsuccessful related acquisition based on performance results, with 2024 losses of 29 million yuan triggering goodwill impairment of 10.75 million yuan.
**Can External Expansion Help the Company Overcome Difficulties?**
Starting from 2021, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s revenue has declined for four consecutive years, dropping from a peak of 2.436 billion yuan in 2020 to 1.739 billion yuan in 2024. Net profit fell from 282 million yuan to 40.33 million yuan.
The company's main business involves sauced and braised meat products and ready-to-eat side dishes, with sauced and braised meat products contributing 72% of total revenue in 2024, while rice products contributed 20%.
Both sauced and braised meat products and rice products have experienced shrinking revenue scales in recent years. Sales volumes for meat products and rice products declined from 40,100 tons and 32,300 tons respectively in 2020 to 22,800 tons and 25,600 tons in 2024, representing decreases of 43% and 21% respectively.
For sauced and braised product companies, performance growth depends on store numbers. Since 2020, Jiangxi Huangshanghuang Group Food Co.,Ltd. has entered a contraction phase, with store count decreasing from 4,627 in 2020 to 3,660 in 2024, a reduction of nearly 1,000 stores over four years. According to the latest disclosure, store count had further declined to 2,898 by the first half of 2025.
The company attempted store expansion again in 2023, with store count increasing by 288 to 4,213 in the first half compared to the previous year-end. However, store expansion failed to drive revenue growth, and store numbers resumed declining from the second half of 2023.
Adding to these challenges, while sales volumes contracted, Jiangxi Huangshanghuang Group Food Co.,Ltd. simultaneously expanded production capacity. In September 2023, the company raised 442 million yuan through private placement to Xinyu Huangshanghuang Investment Management Center (Limited Partnership), controlled by the actual controller's family.
The raised funds, after deducting issuance expenses, were allocated entirely to three projects: the duck slaughtering and by-product high-value utilization processing construction project (Phase I) at Fengcheng Huangda Food Co., Ltd., the annual 8,000-ton sauced and braised food processing construction project at Zhejiang Huangshanghuang Food Co., Ltd., and the food processing and cold chain warehousing center construction project at Hainan Huangshanghuang Food Co., Ltd.
The company's fixed assets have risen significantly in recent years, from 711 million yuan in 2021 to 917 million yuan in 2024, with construction in progress reaching 167 million yuan as of 2024.
With declining sales volumes, low capacity utilization has become increasingly problematic. According to the September 2023 prospectus disclosure, the company's total sauced and braised meat product capacity was 63,000 tons in 2022, with actual output of only 29,500 tons, resulting in a capacity utilization rate of just 46.76%.
According to company disclosures, Fengcheng Huangda Food reached operational status by late June 2024, with the remaining two projects scheduled for completion by June and December 2025 respectively. The 2024 annual report reveals current sauced and braised food processing capacity of nearly 100,000 tons, while 2024 meat product output was only 22,800 tons, 23% lower than 2022 levels, suggesting a capacity utilization rate of approximately 23%. With already low capacity utilization, new capacity additions face significant idle capacity risks.
Under the influence of declining sales volumes and idle capacity, Jiangxi Huangshanghuang Group Food Co.,Ltd.'s gross profit margin and net profit margin have continuously declined, with net profit margin reaching a low of 2.17% in 2024.
Currently, Jiangxi Huangshanghuang Group Food Co.,Ltd. faces a predicament of declining sales volumes, idle capacity, and deteriorating profitability. Whether external expansion through acquisitions can help the company overcome these challenges remains highly uncertain.
