CICC: The target price for maintaining the grain mill (01837) outperforming the industry rating is HK$2.2

The Zhitong Finance App learned that CICC released a research report stating that maintaining the profit forecast for Grain Mill (01837), the estimated revenue for 2026/2027 was 29.57/3.436 billion yuan, +17.1%/+16.2%, respectively; the estimated net profit to mother was 327/397 million yuan, +23.2%/+21.4%, respectively. The current stock price is 9.0/7.2 times the 2026/2027 P/E. Maintain a target price of HK$2.2, corresponding to 2026/2027 P/E of 12.8/10.6 times. Maintain an outperforming industry rating.

CICC's main views are as follows:

1H26's performance was slightly higher than the forecast

The company announced 1H26 results: revenue of 1,450 million yuan, +27.8% year-on-year; net profit to mother of 156 million yuan, +46.0% year-on-year. Due to the outstanding performance of offline shelf channels and dietary etiquette, 1H26's performance was slightly higher than expected.

Offline shelf channels and e-commerce channels contributed to revenue growth, and the growth of dietary gifts accelerated

By channel, 1) The 1H26 supermarket counter business achieved revenue of 530 million yuan, +12.3% over the same period last year. 125 new counters were added in the first half of the year. Through product optimization and improved operating efficiency, offline counters have increased the frequency of repeat purchases and purchases for regular customers. 2) The 1H26 offline shelf channel achieved revenue of 345 million yuan, +65.2% over the same period, mainly due to the impressive performance of new products from Sam Channel; in addition, the company also increased cooperation with Hema, BC supermarkets and community stores. 3) The 1H26 online e-commerce channel reached 575 million yuan, +26.6% over the same period, benefiting from the company's increased brand promotion and marketing, as well as a large number of core products. By product, the company's three core product segments all showed relatively rapid growth, and dietary gift boxes contributed a lot of growth.

Changes in channel structure, improved operating efficiency, and year-on-year increase in profitability

The gross margin of 1H26 company was -1.9ppt year-on-year, mainly due to an increase in the share of offline shelf channels with low gross margins. The 1h26 sales expense ratio was -3.2ppt year-on-year, due to a decrease in the cost rate of integrated channels and an increase in promotion efficiency. Overall, the company's 1H26 net profit margin was +1.3ppt year on year, and profitability improved year over year.

Looking ahead, the bank expects phased revenue growth in the second half of 2026 to be pressured, but the medium- to long-term trend is positive

Due to downstream customer Walmart's own business strategy adjustments, the company's previous gradual withdrawal of Walmart counters may have an impact on supermarket counter channel revenue in the second half of 2026. However, in the medium to long term, the company will still benefit from the pharmaceutical and food homologous circuit dividends, leading product innovation, and is expected to maintain a steady growth trend.

Risk warning: Consumer demand is changing rapidly, channel expansion falls short of expectations, industry competition intensifies, food safety issues.