Sinolink: Maintains Buy rating for ZJLD (06979), 26H1 performance better than expected.

Sinolink has released a research report maintaining a "Buy" rating for ZJLD (06979), predicting the company's revenues for 2026, 2027, and 2028 to be 4.33 billion, 4.80 billion, and 5.34 billion yuan, respectively, representing year-on-year growth of +18.6%, +11.0%, and +11.2%; net profit attributable to shareholders is expected to be 820 million, 1.01 billion, and 1.21 billion yuan, respectively, representing year-on-year growth of +52.6%, +22.8%, and +20.0%, corresponding to EPS of 0.24, 0.30, and 0.36 yuan. Sinolink's main points are as follows: Performance Summary On August 19, 2026, the company disclosed its mid-year performance for 2026. During this period, it achieved a revenue of 2.546 billion yuan, a year-on-year increase of +2.0%; net profit attributable to shareholders was 581 million yuan, a year-on-year increase of +1.0%; adjusted net profit was 626 million yuan, a year-on-year increase of +2.1%. The performance for the first half of 2026 was better than expected, with the adjustments mainly related to equity incentive expenses and payments to alliance partners. By Product In the first half of 2026, the revenues for Zhen Jiu, Li Du, Xiang Jiao, and Kai Kou Xiao were 1.34 billion, 790 million, 280 million, and 80 million yuan, respectively, showing year-on-year changes of -10%, +29%, +2%, and +1%. The sales volumes changed by -12%, +48%, +19%, and +24%, and the ton prices changed by +2%, -13%, -15%, and -18%, with gross profit margins changing by +1.4, -1.8, +0.7, and -4.6 percentage points. The internal optimization of Zhen Jiu's structure has driven an increase in ASP (average selling price) and gross profit margin, primarily due to the incremental contribution from Da Zhen (released in June 2025) and the controlled stock of Zhen Shi Wu before its upgrade; for Li Du, the contribution from increased volumes of mid-range and high-end products (such as the Li Du Wang series) was significant, while the weakening internal structure led to a decline in ASP and gross profit margin. Meanwhile, Li Du has advanced further in its national expansion, with relatively better performance in the Shandong, Henan, Hebei, and Jiangsu regions. Since its launch, Da Zhen has already generated over 1.4 billion yuan in revenue. The company has further extended the alliance partners' payment plan to Zhen Shi Wu; in the first half of 2026, the company disclosed that it granted 22.778 million shares to 1,524 eligible alliance partners and reserved 17.223 million shares for 1,214 eligible alliance partners who are completing the necessary procedures. By the end of the first half of 2026, there were 2,755 eligible alliance partners holding economic benefit units. Financial Structure 1) In the first half of 2026, the company's overall gross profit margin increased by +0.7 percentage points year-on-year to 59.7%, while the net profit margin decreased by -0.2 percentage points year-on-year to 22.8%; the adjusted net profit margin was steady at 24.6% year-on-year. 2) By the end of the first half of 2026, the balances of accrued sales returns and rebates/customer advance payments were 670 million and 1.28 billion yuan, respectively, showing increases of +70 million and a decrease of -440 million compared to the end of 2025. Risk Warning Policy risk, industry demand recovery lower than expected, alliance partner model operations below expectations, food safety risks.