Second-quarter earnings missed expectations, but Goldman Sachs expects growth to recover in 4Q26 following channel restructuring

Overview

The report evaluates Yankershop Food's 2Q26 results, channel restructuring, category and new product strategies, cost pressures, and earnings outlook. Although second-quarter earnings missed expectations and channel adjustments will continue to weigh on the third quarter, Goldman Sachs believes that expansion in value retail and membership stores, growth in seafood and egg snacks, and supply-chain initiatives will support a return to more normalized growth from the fourth quarter, and maintains its Buy rating.

Core views

Yankershop Food announced its 2Q26 results on August 19. Net profit and adjusted net profit were Rmb195mn and Rmb186mn, respectively, flat and up 4.7% year-on-year, and 9.8% and 5.8% below Goldman Sachs' forecasts, respectively. The earnings miss was mainly attributable to higher selling and administrative expense ratios, while strong sales performance partly offset the expense pressure. Operating cash flow increased from Rmb216mn in 2Q25 to Rmb251mn in 2Q26. Goldman Sachs believes that weak sales in mom-and-pop stores, convenience stores, and the konjac category were the biggest surprises in the period, and therefore lowered its 2H26 sales growth forecast from 19% to 7%. Channel adjustments are the main reason for the recent growth slowdown. The mom-and-pop store and convenience store channels shifted to a key-account model from the end of 1Q26, and the number of distributors has declined by approximately 30% since May. Market handovers and distributor restructuring are expected to take approximately six months, putting packaged product and konjac sales volumes under pressure in 2Q26—3Q26. The company is shifting from rapid customer acquisition and single-product distribution to a key-account-led, multi-category model. Management believes that once the company's products account for more than 10% of sales at key customers, those customers will have greater incentives to support multi-category promotion, with the benefits of the adjustment expected to begin emerging in 4Q26. The e-commerce business began restructuring in June—July of the previous year, and online revenue declined approximately 50% year-on-year in 1H26. It is expected to continue declining year-on-year in 3Q26—4Q26, but the rate of decline and drag on overall growth should gradually narrow. Management expects revenue growth to recover to 8%—15% year-on-year in 4Q26, with 8% as the base case. Value retail currently contributes approximately 40% of the company's revenue and is one of its most important growth channels. The company's penetration within the Wanchen and Busy for You networks remains limited. Management believes that further entry into these networks could enable nationwide distribution and broader consumer coverage, and is positive on growth over the next 2—3 years and continued healthy development over the next five years. The membership-based key-account channel grew faster than company guidance in 2Q26, mainly driven by product innovation, promotions, and premium health-oriented products. Management views membership stores and discount snack retail as the two major growth engines for the next two to three years. Instant retail and fresh-food snacks provide additional channels, with products including dried mango, ready-to-eat konjac, cod snacks, quinoa toast, and sandwiches. The category mix remains an important basis for Goldman Sachs' positive view. Seafood snacks and egg snacks grew 56% and 51% year-on-year, respectively, in 1H26. Together with konjac, the three core categories grew 31% in aggregate and accounted for 60% of company sales. Konjac growth slowed due to delayed entry into the Wanchen and Busy for You networks, adjustments in mom-and-pop stores and convenience stores, and the company's proactive reduction of konjac end-cap resources to support multi-category development. The company plans to launch spicy konjac in 3Q26 and hopes to establish a second growth curve driven by flavor innovation over the next two years. Management expects konjac growth to slow in FY26 but remains positive on its growth potential over the next three to five years. Seafood snacks achieved growth across all channels in 1H26, led by membership stores. Even though the company's overall e-commerce revenue declined approximately 50%, e-commerce sales in this category still grew 35%. The company has established cod as a core raw material, with products including cod sausages, cod rolls, cod tofu, and crab sticks, while chikuwa remains under development. Using Japan's mature market as a reference, management believes that high-protein, healthy, and global consumption trends will support the development of China's deep-sea snack market, and expects long-term growth of 15%—20% for seafood snacks. Egg snacks similarly target long-term growth of 15%—20%, but insufficient in-house quail egg supply has constrained the expansion of products such as soft-boiled eggs. Phase I and Phase II breeding facilities are operating at full capacity, Phase III is under construction, and a site has been selected for Phase IV. The company emphasizes prioritizing the development of its own breeding, quality, and supply-chain capabilities rather than expanding aggressively before supply and quality have stabilized. Regarding new products, demand has been strong for the Yili co-branded pure milk toast launched at the end of June. By August, capacity was close to full utilization, operating nearly 29 days per month with two shifts per day, while supply remained tight. The company is also advancing dried mango made with a new process, additive-free dried mango, short-shelf-life ready-to-eat konjac, cod snacks, quinoa toast, and sandwiches. Goldman Sachs believes that product innovation, health orientation, and a one-stop product portfolio for distributors will help broaden channels. Meanwhile, easing competition in the konjac industry also provides a positive read-through for Weilong. Earnings remain under pressure from raw materials and expenses, but the 2Q26 gross margin improved both year-on-year and quarter-on-quarter, benefiting from product mix optimization, supply-chain efficiency, and scale effects in key categories. Cod prices have risen since April and are expected to add approximately Rmb20mn in costs per quarter from 2Q26—4Q26. Higher packaging material prices are expected to add approximately Rmb30mn in aggregate costs during 2Q26—3Q26. The company is mitigating volatility through raw-material price locking, strategic partnerships, and advance purchases of certain bulk raw materials, and plans to visit Alaska in September to advance cooperation and enhance the stability of raw-material supply, quality, and pricing. Konjac inventory and spot purchase prices have declined both year-on-year and quarter-on-quarter. Management expects the pressure to ease gradually in FY26, with a potentially more pronounced decline in FY27. Brand and promotional investment in the first half was mainly used for celebrity endorsements, advertising, and channel roadshows. Management expects selling expenses to grow broadly in line with revenue in 2H26 and will continue to control costs. Despite channel adjustments and cost pressures, management reiterated the FY26 employee stock ownership plan net profit target of Rmb765mn and believes that medium- to long-term net profit growth can outpace revenue growth. After incorporating the 2Q26 results, Goldman Sachs lowered its 2026—2028 net profit forecasts by 6%—8%, reflecting a longer-than-expected e-commerce downsizing and adjustment period, weaker-than-expected konjac growth, and higher selling expenses from brand investment amid intensifying industry competition. The new forecasts show 2026E revenue of Rmb6,076mn, up 5% year-on-year; net profit attributable to shareholders of Rmb849mn, up 13% year-on-year; and EPS of Rmb3.11. Revenue for 2027E and 2028E is projected at Rmb6,757mn and Rmb7,593mn, respectively; net profit attributable to shareholders at Rmb977mn and Rmb1,134mn, respectively; and EPS at Rmb3.58 and Rmb4.16, respectively. The net margin is expected to increase from 14.0% in 2026E to 14.9% in 2028E. Goldman Sachs lowered its 12-month target price from Rmb60 to Rmb56, while maintaining an 18x P/E valuation multiple based on FY2026E EPS. Based on the current price of Rmb45.19 stated in the report, the target price implies 23.9% upside, and Goldman Sachs therefore maintains its Buy rating. The key factors underpinning this view are whether short-term channel disruptions subside as scheduled, whether growth recovers in the fourth quarter, and whether new product ramp-up and expansion in value retail and membership stores can offset slowing konjac growth and raw-material cost pressures.

Analysis framework

Goldman Sachs first compares 2Q26 net profit, adjusted net profit, and cash flow with the prior-year period and its own forecasts, identifying expense ratios rather than sales as the source of the earnings deviation. It then analyzes channel changes across value retail, membership stores, mom-and-pop stores and convenience stores, e-commerce, and instant retail, and examines growth drivers across konjac, seafood, egg products, and new products. The report further assesses the costs of cod, konjac, and packaging materials, procurement measures, and expense discipline, then adjusts its 2026—2028 revenue and earnings forecasts accordingly, and finally derives the 12-month target price by applying an 18x P/E multiple to FY2026E EPS.

Methodology notes

• Valuation methodologyPE/PEG valuation

  P/E valuation based on forecast earnings per share

  The report uses FY2026E EPS as the earnings base and applies an unchanged 18x P/E multiple to derive a 12-month target price of Rmb56. The target-price reduction reflects lower earnings forecasts rather than a change in the valuation multiple.

• Industry/sector analysis frameworkSupply-demand framework

  Raw-material and production-capacity supply-demand analysis

  The report assesses cost pressures, the pace of product ramp-up, and gross-margin resilience by examining cod and konjac raw-material prices, procurement price locking, quail breeding capacity, and finished-product supply constraints.

• (Method outside the vocabulary)

  Operating analysis by channel and category

  The report separately tracks value retail, membership stores, traditional wholesale, e-commerce, and instant retail, while combining these with the performance of konjac, seafood, egg products, and new products to explain the short-term growth slowdown and sources of medium- to long-term growth.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Yankershop Food (002847.SZ)

  The report believes the company is facing short-term headwinds from channel restructuring, slowing konjac growth, and rising costs, but that value retail, membership stores, seafood and egg snacks, and new product innovation support a medium-term recovery.

  Strengths

  Value retail contributes approximately 40% of revenue; the three core categories account for 60% of sales; seafood and egg snacks are growing rapidly; the company offers distributors a one-stop, multi-category product portfolio and is strengthening its supply chain through self-operated breeding, strategic procurement, and raw-material partnerships.

  Weaknesses

  The restructuring of mom-and-pop stores and convenience stores has reduced the distributor count by approximately 30%, e-commerce revenue has fallen sharply, konjac growth is weaker than expected, in-house quail egg supply is insufficient, and brand investment has increased selling expenses.

  Comparison

  The report uses Japan's mature market as a reference for the development of China's seafood snack market and believes that easing competition in konjac provides a positive read-through for Weilong. It also notes that Yankershop Food has advantages in its one-stop product portfolio and broad channel development.

  Risks

  Intensifying competition in the leisure food industry, particularly from private-label products; slower-than-expected discount snack store openings; higher-than-expected raw-material costs.

Key data

• 2Q26 net profit／adjusted net profitRmb195mn／Rmb186mnFlat／up 4.7% year-on-year, respectively, and 9.8%／5.8% below Goldman Sachs' forecasts
• 2Q26 operating cash flowRmb251mnRmb216mn in 2Q25
• 2H26 sales growth forecast7%Goldman Sachs previously forecast 19%
• 4Q26 normalized revenue growth8%—15% year-on-yearManagement uses 8% as the base case
• Performance of the three core categoriesAggregate growth of 31% in 1H26, accounting for 60% of salesSeafood snacks and egg snacks grew 56% and 51% year-on-year, respectively, with konjac as the third core category
• Value retail revenue contributionApproximately 40%Viewed as one of the company's major growth channels
• Change in distributor countApproximately 30% decreaseSince May 2026, as the mom-and-pop store and convenience store channels transitioned to a key-account model
• Change in 1H26 e-commerce revenueDown approximately 50% year-on-yearE-commerce sales of seafood snacks grew 35% over the same period
• Cod cost pressureApproximately Rmb20mn／quarterExpected to affect 2Q26—4Q26
• Packaging cost pressureApproximately Rmb30mnExpected to be concentrated in 2Q26—3Q26
• FY26 employee stock ownership plan net profit targetRmb765mnManagement maintained the original target
• 2026E revenue／net profit attributable to shareholdersRmb6,076mn／Rmb849mnUp 5%／13% year-on-year, respectively
• 2027E—2028E revenueRmb6,757mn／Rmb7,593mnExpected to grow 11%／12% year-on-year, respectively
• 2027E—2028E net profit attributable to shareholdersRmb977mn／Rmb1,134mnCorresponding EPS of Rmb3.58／Rmb4.16
• 2026E—2028E earnings forecast revisionsNet profit lowered by 6%—8%New／old EPS estimates are Rmb3.11／3.34, Rmb3.58／3.81, and Rmb4.16／4.50, respectively
• 2026E—2028E marginsGross margin 32.3%／32.9%／33.3%; net margin 14.0%／14.5%／14.9%EBIT margin is expected to be 15.0%／15.7%／16.3%
• Valuation and target price18x FY2026E EPS; 12-month TP Rmb56Previous target price Rmb60; current price Rmb45.19, implying 23.9% upside
• Market size dataMarket capitalization Rmb12.3bn; enterprise value Rmb12.5bn; 3-month average daily trading value Rmb209.4mnMarket benchmarks listed on the report's key data page

Impact & implications

The report believes that weakness in the second and third quarters of 2026 is driven more by channel restructuring, e-commerce contraction, and temporary cost pressures than by the disappearance of long-term category opportunities. If the transformation of mom-and-pop stores and convenience stores begins to take effect in the fourth quarter, value retail and membership stores continue to expand, and seafood, egg products, and new products sustain rapid growth, the company's revenue could return to normalized growth. Product mix, supply-chain measures, and expense discipline could also enable medium- to long-term profit growth to outpace revenue growth. However, Goldman Sachs' lower earnings forecasts and target price reflect a slower-than-previously-expected recovery path that requires both successful new product ramp-up and easing cost pressures.

Risks

• Competition in the leisure food industry may intensify further, particularly competition from retailers' private-label products.
• Discount snack retailers may open stores more slowly than expected, reducing the contribution from channel expansion.
• Raw-material costs may be higher than expected, further compressing earnings.

What to watch

• Monitor the continuing drag from the restructuring of mom-and-pop stores, convenience stores, and e-commerce on 3Q26 sales, and whether 4Q26 revenue growth can recover to the normalized range of 8%—15% year-on-year.
• Monitor the company's progress in entering the Wanchen and Busy for You networks, and whether value retail's approximately 40% revenue contribution can continue to increase.
• Monitor regional and channel feedback following the launch of spicy konjac in 3Q26, and whether it can establish a second growth curve driven by flavor innovation.
• Monitor whether seafood and egg snacks can achieve management's long-term growth target of 15%—20%, and whether Phase III and Phase IV quail breeding facilities can alleviate supply bottlenecks.
• Monitor cod and packaging cost pressures, changes in konjac procurement prices, and progress on the Alaska raw-material partnership in September.
• Monitor whether the FY26 employee stock ownership plan net profit target of Rmb765mn can be achieved amid channel adjustments and raw-material price increases.