Goldman Sachs: WL DELICIOUS (09985) is rated as "Buy" with a target price of HKD 13.9.

Goldman Sachs released a research report stating that the rating for WL DELICIOUS (09985) is "buy," with a 12-month target price of 13.9 Hong Kong dollars, based on a 19 times 2027 expected P/E ratio and discounted back to 2026 at an 8.6% cost of equity. Despite intense competition in the snack industry, the bank expects the company to continue its growth, thanks to: 1) first-mover advantage, enabling it to adjust to the increasingly fierce competition with its nationwide coverage and resources; 2) smaller companies may be more susceptible to cost increases and price pressures due to scale disadvantages; 3) in combination with the brand image of Wei Long and insights into konjac products and the market, the company has the potential to achieve multiple enhancements in consumer penetration, channel expansion, SKU, and flavor. 1) reiterated full-year guidance: sales growth of 15-20% year-on-year, gross margin of 46-48%, net profit margin of 17-20%. The company expects sales, general and administrative expense rates in the second half of the year to be higher than the first half. This is because the company has increased marketing and promotion activities for konjac and kelp, the two major growth categories, mainly to support Wuxi Online Offline Communication Information Technology Co., Ltd. This is a planned investment to boost brand assets and market share. The company's long-term goal is a gross margin exceeding 45% and a net profit margin exceeding 15%. 2) Third quarter 2025 trends: Despite a higher base, the performance in the third quarter of 2025 remained robust; however, the growth rate in percentage terms may fluctuate compared to the first half of the year. Sales of Sesame Konjac Slush reached RMB 60-70 million in August-September, with seasoning noodle products showing signs of stabilization, and even achieving year-on-year growth in individual months in the third quarter. 3) Channel review: Snack discount stores: Discount stores remain the fastest-growing channel. With the push for channel expansion, the contribution to annual sales is expected to reach 25-30%, with a long-term goal of 30-35%. Channel profitability/growth ranking: Traditional distributors are the most profitable channel, followed by discount stores, KA channels, and e-commerce channels. The operating profit margin of discount stores is roughly equal to the overall company level, with stable trends but fierce competition; discount stores are eager to cooperate with strong and well-known brands like Wei Long with high product turnover. The rapid store expansion of these channel partners has brought substantial growth opportunities for Wei Long through innovative product layout. 4) Raw material cost review: Supply-demand imbalance led to high prices of konjac powder last year. However, the company optimistically believes that prices will return to normal next year (2026-2027) as the planting area expands. 5) International expansion: Management reiterates a sales target of approximately RMB 100 million for the year; the company is still looking for partners in other Southeast Asian countries and has made progress in the shelving of konjac and kelp products in major Southeast Asian retailers such as 7-11 and Lotus's.