Summary of Key Points
Ganyuan Food has decided to reinstate its expansion project ("Phase 6 Production and Construction Project (1)," which was shelved for a year. The company plans to invest 101 million yuan in this project, with the funds being reallocated from its original marketing campaign. However, in 2025, Ganyuan experienced its first decline in both revenue and net profit since going public, with revenue falling by 7.15% and net profit dropping by 44.59%. The current capacity utilization rate is very low (the annual income from the Henan factory is only 2.2%, which is lower than the yield from high-interest bank deposits), while marketing expenses have increased significantly by 85 million yuan. Additionally, the company is facing issues such as price increases that negatively impact sales volume, declining distribution channels, and a lack of new products. The restart of the project may serve to reassure investors, but it also exposes the company's strategic indecision and weakness in core competencies.
I. Expansion Restart: A Gesture to Boost Market Confidence, Yet with Uncertainty
Ganyuan's expansion project was originally scheduled for 2025 but was put on hold due to industry and policy changes (no land was acquired, and no funds were spent). By resuming it now, the company is essentially sending a signal to the market that its strategy for capacity expansion remains unchanged—given the poor performance in 2025, it needs to stabilize investor confidence. However, the company has also left itself a backup option: "The pace and funding will be adjusted according to market conditions, approval processes, and demand." This implies that there is no absolute certainty, and the restart might more closely reflect a "statement of intent" rather than a firm commitment.
II. Performance Decline: Multiple Factors Contributing to Weak Foundation
Ganyuan's performance decline in 2025 was not accidental; it resulted from a combination of three issues:
1. Price Increases Hitting Sales: Rising costs for raw materials such as palm oil led Ganyuan to raise prices across its products (for example, the price of core nuts increased from 30 yuan to 34 yuan per kilogram), causing a 27% drop in sales volume and dragging down revenue.
2. Declining Distribution Channels: Distribution revenue decreased by 17.7%, and the number of distributors fell by 154. Meanwhile, the contribution per distributor decreased from 516,000 yuan to 443,000 yuan, indicating that distributors are having difficulty selling products, leading to a decline in channel vitality.
3. Lack of New Products: Previously, Ganyuan relied on its comprehensive nuts and bean nut series as drivers of growth. In 2025, both revenue and sales from these categories declined. With no new products (other than the traditional "green peas" and "fava beans") to drive growth, the company is struggling.
III. Existing Capacity Underutilized: Is Investing in a New Factory Worth It?
The most problematic aspect is that Ganyuan's existing capacity is not being fully utilized, yet it still plans to build a new factory:
The Henan Anyang factory was planned for 2020, and after three years of operation, the cumulative net profit was only 20 million yuan, resulting in an annual income of just 2.2%—lower than the yield from high-interest bank deposits (currently around 3%). The annual report also acknowledges a decline in revenue and low capacity utilization. If the new factory fails to generate sufficient sales after completion, the investment could be wasted.
IV. Excessive Marketing Expenses and Strategic Uncertainty
The financial situation is even more perplexing: 100 million yuan was intended for the expansion project but was not used; instead, marketing expenses soared by 85 million yuan in 2025 (the highest since going public), with the sales expense ratio rising from 12.67% to 17.69%. As a result, the gross profit margin decreased by only 0.7%, while the net profit margin plummeted from 16.67% to 9.91%. This shows that the company's strategy is inconsistent: it alternates between focusing on expansion and relying on marketing to boost performance, without achieving significant results in either area.
V. Fundamental Issues: A Double Shortfall in New Products and Distribution Channels
Ganyuan's real problem lies not in whether to expand or not, but in the lack of viable products and effective distribution channels:
- New Product Shortage: Compared to competitors like Yanjin Puzi (which saw a 107% increase in sales of konjac products) and Liuliu Mei (which expanded into dried plums and preserved plums), Ganyuan lacks innovative products that can drive growth.
- Channel Decline: Traditional distribution channels are weakening, and online direct sales have only increased by 168 million yuan, while competitors have shifted to new channels such as snack vending and specialty stores.
Expansion is merely a superficial measure; it does not address these core issues, and performance is unlikely to improve.
Conclusion
Ganyuan's decision to restart its expansion project is more of a symbolic gesture than a practical solution. The underlying problems with products and distribution channels remain unresolved, and existing capacity remains underutilized. With no clear new growth drivers, the new factory could end up being another idle asset. For investors, it will be crucial to see whether Ganyuan can quickly address these shortcomings in new products and distribution channels; otherwise, the expansion effort will be futile.