Happy Family 2025 Annual Report Analysis: Net profit down 70.03% Year-over-Year, Financial Expenses Doubling with a 129.29% Increase

Deep Decline in Core Profitability Indicators

Operating Revenue: Year-over-Year Drop of 19.11%, Traditional Channels Under Significant Pressure

In 2025, Happy Family achieved operating revenue of 1.5 billion yuan, a 19.11% decrease from 1.86B yuan in 2024. By channel, the main revenue source, the distribution model, earned 1.1B yuan, a 26.95% decline year-over-year, accounting for 73.54% of main business revenue, down from 81.44% last year; only the snack wholesale channel saw countercyclical growth, with revenue of 175 million yuan, a 52.06% increase, but this channel only accounts for 11.65%, making it difficult to offset the sharp decline in traditional channels. By product, the core coconut juice beverage revenue was 756 million yuan, down 21.51% year-over-year; fruit canned products earned 502 million yuan, down 19.96%, with both major products experiencing significant contraction.

Net Profit and Non-Recurring Net Profit: Both Plummeted Over 70%, Profitability Significantly Shrunk

The company’s net profit attributable to shareholders of the listed company in 2025 was 44.17 million yuan, a 70.03% plunge from 147 million yuan in 2024; net profit excluding non-recurring gains and losses was 40.89 million yuan, down 71.75% from 145 million yuan last year. Quarterly data shows volatile profitability: Q1 profit was 34.25 million yuan, Q2 and Q3 recorded losses of 15.70 million yuan and 8.03 million yuan respectively, and Q4 profit was 33.65 million yuan. The full-year profit mainly depended on the first and last quarters, with losses in Q2 and Q3 pulling down the annual profit level.

Earnings Per Share: Also Significantly Declined, Shareholder Returns Greatly Reduced

Basic earnings per share were 0.1056 yuan/share, down 69.42% from 0.3453 yuan/share in 2024; non-recurring EPS was 0.0978 yuan/share, down 71.1% from 0.3383 yuan/share last year. The sharp decline in EPS directly reflects a significant decrease in the company’s ability to generate returns for shareholders.

Noticeable Changes in Expense Structure

Total Expenses: Down 13.46% Year-over-Year, but Financial Expenses Soar

In 2025, total period expenses amounted to 357.92 million yuan, down 13.46% from 426.74 million yuan in 2024. However, the internal structure of expenses shows clear differentiation: selling, management, and R&D expenses all declined to varying degrees, with only financial expenses increasing sharply.

Selling Expenses: Significant Cost Reduction, Core Investment Shrinks

Selling expenses decreased by 25.53%, mainly due to reduced core investments: labor costs dropped from 190 million yuan to 149 million yuan, a 21.58% decrease; promotional expenses fell from 39.16 million yuan to 24.57 million yuan, a 37.27% decline, mainly due to reduced endorsement fees and advertising material costs; promotional costs dropped from 14.94 million yuan to 6.61 million yuan, a 55.79% decrease, primarily driven by a significant reduction in e-commerce promotion expenses.

Management Expenses: Slight Decline, Structure Remains Stable

Management expenses decreased by 3.88%, from 136.20 million yuan to 131 million yuan, remaining relatively stable overall. Notably, labor costs fell from 68.56 million yuan to 65.22 million yuan, and rent and property maintenance costs decreased from 18.37 million yuan to 16.14 million yuan, representing the main reductions; other items saw minor changes.

Financial Expenses: Doubling, Interest Payments Significantly Increased

Financial expenses surged by 129.29%, from 2.97 million yuan to 6.82 million yuan, mainly due to increased loan scale, with interest expenses rising from 5.75 million yuan to 8.83 million yuan, while interest income decreased from 5.34 million yuan to 3.90 million yuan, leading to a substantial increase in net financial costs.

R&D Expenses: Halved, R&D Staff Reduced

R&D expenses fell by 53.34%, from 4.80 million yuan to 2.24 million yuan, mainly because the number of R&D personnel decreased from 10 to 6, a 40% reduction. The educational background structure of R&D staff also changed: undergraduates decreased from 7 to 4, and vocational college graduates from 1 to 0, with master’s and college diploma staff remaining unchanged.

Cash Flow Structure Shows New Characteristics

Operating Cash Flow: Net Increase of 46.85%, Improved Profit Quality

In 2025, net cash flow from operating activities was 88.49 million yuan, up 46.85% from 60.26 million yuan in 2024. The main reason is reduced cash payments to employees and for employee-related expenses, as well as taxes and fees paid, with operating cash outflows decreasing by 27.34%, while inflows decreased by 25.30%, resulting in net growth. However, the difference between net operating cash flow and net profit persists, mainly because depreciation and amortization of fixed and intangible assets reduced net profit but did not impact operating cash flow.

Investing Cash Flow: Slightly Larger Outflow, Continued Overseas Investment

Net cash flow from investing activities was -117 million yuan, an expansion of 5.59% compared to -111 million yuan in 2024. During the period, investing cash outflows totaled 135 million yuan, an increase of 21.4%, mainly due to ongoing overseas coconut processing projects, with the Indonesia subsidiary investing 50.26 million yuan, at 11.86% project progress.

Financing Cash Flow: Significantly Narrowed Outflow, Reduced Share Repurchase Spending

Net cash flow from financing activities was -38.27 million yuan, an 84.98% reduction from -255 million yuan in 2024. On one hand, increased borrowings during the period led to a 46.78% rise in financing inflows; on the other hand, share repurchase expenses decreased sharply by 16.27%, collectively resulting in a much smaller net outflow.

Compensation of Core Management Personnel

In 2025, the compensation for core management was as follows:

• Chairman Li Xing: pre-tax total remuneration of 2.7343 million yuan;
• President Li Zihao: pre-tax total remuneration of 2.5496 million yuan;
• Vice Presidents Cheng Song, Li Kangrong, Yang Gang, Yang Ronghua: pre-tax total remuneration of 2.5621 million yuan, 2.5640 million yuan, 2.5590 million yuan, and 2.5617 million yuan respectively;
• CFO Weng Sumin: pre-tax total remuneration of 2.5607 million yuan.

Overall, the compensation for key management remains at a high level and relatively close, reflecting the company’s incentive strategy for its core management team.

Multiple Risks Facing the Company

Market Competition Intensifies Risk

The food and beverage industry is highly marketized with low technological barriers, attracting many competitors and offering consumers numerous choices. The revenue decline in 2025 already reflects competitive pressure. If competition intensifies further, the company’s revenue and profitability may continue to decline.

Risks in New Product R&D and Promotion

Consumer preferences change rapidly and diversify. Although the company has launched new products in recent years, the R&D and promotion of new products carry uncertainties. If new products do not meet sales expectations or fail to keep pace with market demand, it could adversely affect operations and profits.

Raw Material Price Fluctuation Risks

Core raw materials like coconuts and yellow peaches are significantly affected by climate and supply-demand dynamics. In 2025, procurement prices for fresh coconut juice and seasonal yellow peaches increased by over 30% year-over-year, directly increasing production costs by 38.53 million yuan. Large fluctuations in raw material prices will continue to impact profitability.

Distributor Model Risks

The company mainly relies on a distributor model. In 2025, the number of distributors decreased from 2,236 to 1,962, a 12.25% decline, with regional decreases across the board. Poor management of distributors could affect regional sales performance.

Food Safety Risks

Food safety is vital for food companies. Any lapses in raw material procurement, production, or storage leading to substandard products or safety incidents could severely damage brand image and operations.

Accounts Receivable Collection Risks

The company extends credit to some distributors, with accounts receivable balance at 142 million yuan, and a bad debt provision of 19.96 million yuan, a 14.09% provision rate. If distributors’ financial conditions worsen, collection difficulties could impact cash flow.