I. Quick Overview of Key Points
Oktobertian, a Hong Kong-listed grain and oil brand that gained popularity through online sales, recently released its financial report for the first half of 2026, which presents a striking contrast. On the surface, total revenue increased by 24.5% year-on-year to 3.814 billion yuan, and net profit increased by 35.4% year-on-year, indicating impressive performance. However, the core profit from its main grain and oil business actually decreased by nearly 30% year-on-year, and the gross margin also fell from 21.8% to 18.2%.
This brand, which initially relied entirely on online sales, has been investing heavily in expanding its offline presence in the past two years in an attempt to reduce its dependence on online platforms. Unfortunately, the expansion costs have consumed a large portion of its profits. Additionally, 70% of its revenue comes from the rice category alone, and its new growth trajectory has not kept up. It is now facing a difficult transition period where it has to manage the challenge of growing larger while facing increasing difficulties in generating profits. Previously, market expectations of rising global grain prices drove up its stock price, but after the financial report was released, investors realized that the company's profitability has weakened. As a result, the stock price has entered a sideways range, and there is a clear divergence in the market's valuation of its value.
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II. Detailed and Easy-to-Understand Explanation
1. The Contradictory Financial Numbers: "Side Businesses Generate Extra Income, While the Main Business Is Losing Money"
Many people's initial reaction to the financial report was that Octobertian's performance was excellent. However, there is a logical flaw that is easily overlooked: the so-called "adjusted net profit" excludes all revenues that are not related to the grain and oil business, focusing solely on the profits from rice sales. In the first half of this year, this figure was only 209 million yuan, a year-on-year decrease of 28.9%, meaning that the main business's profitability has decreased by nearly 30%.
So why did the net profit on the books increase by 35%? The difference is due to "unexpected income" from external investments and financial returns. To put it simply, if you run a fruit shop and this month's profits from selling fruits are 20,000 yuan less than last year, but you receive a 30,000 yuan dividend from a fund you invested in, your total profit on the books still seems higher. However, this suggests that your core business's profitability has actually declined.
The previous rise in the stock price was due to market speculation about rising global grain prices, leading investors to believe that grain companies would profit significantly. But with the release of the financial report, it became clear that the company's profitability had weakened, causing investors to become cautious and preventing the stock price from rising further.
2. Investing in Offline Channels Is Not Mindless Spending: It's a Matter of Losing the Advantage of Online Sales
Many people wonder why Octobertian, which started with success on platforms like Douyin and Taobao (where there are no rental costs for stores), would invest heavily in expanding offline. The reason is that its revenue from these traditional platforms only increased by 3.6% year-on-year, showing little progress. Online advertising costs are becoming increasingly expensive, and if it doesn't invest in marketing, its products may not be visible to customers. If these costs continue to rise, it could face a critical situation where it has to pay more for advertising, potentially leading to a disruption in traffic.
Therefore, Octobertian is trying to diversify its revenue by entering supermarkets and finding distributors, aiming to split its revenue equally between online and offline sales. However, offline sales are more challenging. It has to pay entry fees, display fees, and promotional fees, which can account for 20%-30% of the final selling price. Additionally, costs for raw materials, shipping, and packaging have increased by 30.1%, outpacing the 24.5% growth in revenue. This results in a situation where sales increase, but profits do not.
3. 70% of Revenue Comes from Rice: Putting All Eggs in One Basket
A major risk in Octobertian's product mix is that 70.6% of its total revenue comes from rice. This means that 7 out of every 10 yuan in revenue comes from rice sales, while the remaining revenue from corn, other grains, and dried goods accounts for less than 30%. The company was once looking forward to corn as a second growth driver, but this year its corn sales decreased by 7.3% due to reduced marketing efforts to avoid losses. Although other grain and bean products are also seeing growth, their contribution is too small to offset the impact of rice sales.
This structure is particularly vulnerable: rice prices are highly dependent on the harvest in the Northeast region. If there is a disaster or a price increase, Octobertian's performance could be severely affected. The industry is suggesting new directions for the company, such as focusing on high-end grains, supplying to corporate catering services, and entering premium supermarkets like Sam's Club and Panda Express. However, these initiatives are still in the early stages of development and have not yet become profitable.
4. The Capital Market Is Evaluating Its Potential
Investors have significant disagreements about Octobertian's value. If it is seen as a growing new consumer brand that uses new channels and products, its valuation could be high, potentially reaching 15-20 times its annual profit (about 1 yuan in revenue). If it is considered a traditional grain and oil wholesaler like Jinlongyu, with lower profits, its valuation would be much lower, around 7-10 times its annual profit. The difference in valuation could amount to billions of yuan.
The key questions for investors are: Will the current decline in gross margin be temporary due to rising costs or a long-term trend? Will the new businesses, such as high-end grains and corporate sales, become profitable enough to support the company's growth? If Octobertian can prove that it can become a sustainable, profitable brand with a solid supply chain and distribution network, it could receive a higher valuation. Otherwise, its value may remain similar to that of traditional grain and oil companies.
In summary, Octobertian needs to demonstrate that it is more than a short-lived online sensation and can become a sustainable business. The next 1-2 years will determine whether it can establish a stable source of profit growth.