Summary of Key Points
Vita Milk’s revenue for the 2026 fiscal year decreased by 3% year-on-year (a 5% decrease when excluding exchange rate impacts), but net profit increased by 17%, causing its stock price to rise by more than 9%. The decline in revenue was mainly due to weak traditional sales channels in the mainland and Hong Kong markets. The increase in net profit was attributed to the one-time income from selling a factory in Shanghai and cost control; however, the profitability of its core business continues to decline. Its overseas operations (Australia, New Zealand, Singapore) showed positive growth, and the company plans to reverse this trend with a new team, emerging channels, and new products.
I. Revenue Declines Again: Traditional Channels in Mainland and Hong Kong Are Holding Back
Vita Milk’s total revenue for the 2026 fiscal year was HK$6.061 billion, 3% less than the previous year. The biggest issue came from its home market:
- Mainland Market: Contributing more than half of the revenue (52.6%), but with a year-on-year decrease of 5%, representing a 37% drop from the peak in 2021 (HK$5.067 billion), which means an annual loss of HK$700 million. The company stated that the growth from emerging channels (such as snack vending stores) was not enough to offset the decline in traditional supermarkets and convenience stores. Despite partnerships with companies like Mingming and Wanchen Group, covering 35,000 sales points, the decline in traditional channels was too significant.
- Hong Kong (including Macau and exports): Revenue decreased by 3%, mainly due to a poor business environment.
Overseas markets performed better: Revenue from Australia and New Zealand reached a record high of HK$570 million (a 4% increase), while Singapore’s revenue increased by 9%, serving as the only bright spot.
II. Net Profit Increases by 17%: Thanks to Selling Assets and Cost Savings, but Core Business Shows No Improvement
Despite declining revenue and gross profit margin (slightly dropping from 51.3% to 51%), net profit still increased. There were two non-core factors contributing to this:
1. Profit from Selling the Factory: At the end of 2025, the company sold an idle factory in Shanghai to the Songjiang District Government for urban renewal, earning a one-time profit of HK$151 million—this was not derived from product sales.
2. Aggressive Cost Savings: Annual operating expenses were reduced by 5% (to HK$278.6 million), with lower marketing and administrative costs.
However, excluding these “special circumstances” (the profit from selling the factory and asset impairment losses in Australia), core net profit actually decreased by 4%, indicating that earnings from its main products (soy milk and lemon tea) are still declining.
III. Overseas Operations Become a Lifeline: Why Is Growth Strong in Australia and New Zealand?
Among overseas markets, Australia and New Zealand performed the best, with revenue reaching a new high and losses narrowing by 48%. Possible reasons include:
- High local acceptance of the brand: Vita Milk has been selling products in Australia for many years, establishing a strong foundation.
- Cost optimization: The company improved efficiency by consolidating production facilities (similar to moving production to Dongguan factories in the mainland).
Singapore’s 9% revenue growth also indicates that overseas markets are more stable than the mainland and Hong Kong, making them Vita Milk’s current growth drivers.
IV. Plans for a Turnaround: New Team, New Channels, and New Products
Management emphasizes focusing on its core business. Specific actions include:
1. Rebuilding Traditional Channels: A new sales team was appointed, and sales in the mainland have improved in the second half of the fiscal year; the goal is to restore growth in traditional retail channels.
2. Expanding into Emerging Channels: Continuing to target membership stores (such as Costco) and snack vending stores like Mingming’s.
3. Introducing New Products: Plans to launch new products such as Big Red Robe Finger Lemon Tea and Coffee Latte-flavored soy milk to attract consumers and revitalize the brand.
Whether these efforts will be successful depends on whether the new products are well-received and whether the new team can revive traditional channels. After all, the mainland market still accounts for more than half of Vita Milk’s revenue, so stabilizing there is crucial.
V. Why Did the Stock Price Rise? The Market Focuses on Profit and Dividends
The stock price rose by more than 9% after the earnings announcement, not because of improved revenue, but due to increased profits and dividends. Investors may see that despite declining revenue, the company was able to boost profits through cost savings and asset sales (although one-time). The increase in dividends provides short-term optimism, but long-term success depends on whether the core business can truly improve; otherwise, profits could decline again once these one-time gains are exhausted.
In summary, Vita Milk appears strong on the surface with rising profits and a stock price, but its core business is still struggling. Whether it can turn things around depends on whether new products and the new team can attract consumers effectively.