Jonjee Hi-Tech's 2Q growth is likely to accelerate, with gross margin improvement and Weizimei synergies as the key highlights

Overview

This report is a summary of Goldman Sachs' key takeaways from an investor meeting on Jonjee Hi-Tech (600872.SS). Management said the company has entered a phase of parallel progress in business recovery, incentive mechanism restructuring, execution of Weizimei synergies, and margin improvement. 2Q condiment revenue growth is expected to be higher than in 1Q, earnings growth stronger than revenue growth, gross margin to improve further versus 1Q, and net margin to remain at a high level similar to 1Q.

Core views

The core views include: first, terminating the old ESOP does not weaken the medium- to long-term target, but is a pragmatic adjustment based on the macro and operating environment, with a more sustainable new incentive mechanism possibly to follow; second, operating momentum improved in 2Q, with healthy inventory, solid sell-through, and better price recovery than last year; third, Weizimei's compound condiment synergies will mainly materialize in 2H, with incremental growth coming from cross-selling through 2C channels, foodservice channel expansion, and content e-commerce; fourth, profits benefit from gross margin improvement and operating efficiency, and despite some front-loaded provisions for new project expenses in 2Q, net margin is still expected to remain close to the high 1Q level; fifth, for shareholder returns, the regular payout ratio is expected to remain stable, while substantive progress in land proceeds could trigger discussion of a special dividend.

Analysis framework

The report is primarily based on management commentary from the investor meeting, providing qualitative analysis and a review of key operating data around revenue growth, channels and inventory, Weizimei synergies, margins, incentive mechanisms, and shareholder returns, and uses a P/E valuation framework to derive a 12-month target price.

Methodology notes

• Valuation methodsP/E target price method

  12-month target price

  Goldman Sachs' 12-month target price of Rmb16.0 is based on 18x P/E, applied to 2027E EPS and discounted to 2026E using a 10% COE.

• Factor frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  GS Factor Profile provides investment context for a stock by comparing it with the market coverage universe and industry peers using growth, financial returns, valuation multiples, and composite indicators.

• Event frameworkM&A Rank

  Acquisition probability tiers

  Goldman Sachs uses M&A Rank from 1 to 3 to assess the probability that a covered company becomes an acquisition target, where Rank 1 indicates high probability, Rank 2 indicates medium probability, and Rank 3 is generally not included in the target price.

• Database toolQuantum

  Financial history, forecasts, and ratio database

  Quantum is Goldman Sachs' proprietary database and can be used for in-depth single-company analysis as well as cross-industry and cross-market company comparisons.

Asset mapping & comparison

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

• Jonjee Hi-Tech（600872.SS）

  Covered stock

  Strengths

  2Q revenue growth is expected to outpace 1Q, gross margin is improving, and net margin remains high; inventory is healthy, sell-through is solid, and price recovery is better than last year.

  Weaknesses

  The new incentive scheme has yet to be implemented after termination of the old ESOP; 2Q includes front-loaded provisions for new project expenses; the target price relative to the price shown on the disclosure page indicates limited upside.

  Comparison

  The report evaluates the company within Goldman Sachs' Food & Beverage coverage universe, with covered peers including condiment, beer, dairy, and beverage companies.

  Risks

  If channel recruitment, demand recovery, operating efficiency, or the soy sauce competitive landscape fall short of expectations, revenue and margin improvement may be weaker than management expects.

• Weizimei

  Consolidated business and synergy growth platform

  Strengths

  The current B2B business is stable, and 2H synergies can bring incremental growth through the Chubang 2C network, foodservice channels, and content e-commerce.

  Weaknesses

  1H is mainly a preparation period for 2H synergies, and growth delivery depends on execution pace and the efficiency of incremental investment.

  Comparison

  Compared with the traditional condiment business, compound condiments and hotpot-related scenarios have stronger flexibility for new products and channel expansion.

  Risks

  If the Rmb100-150mn investment in new projects converts inefficiently, it may weigh on short-term expense ratios and weaken earnings elasticity.

Key data

• 1Q26 condiment revenue growth+15% YoYManagement said 2Q condiment revenue growth is expected to exceed 1Q.
• Inventory levelAverage around 2.5 months; core markets around 1.5-2.0 monthsManagement believes healthy inventory supports price recovery and year-to-date sell-through.
• April-May profit performanceNet profit growth significantly outpaced revenue growthManagement said April-May net profit growth exceeded the company's internal budget growth target.
• 1Q26 net marginHigh teens percentageManagement expects 2Q net margin to expand YoY and remain at a high level similar to 1Q.
• 2Q gross marginHigher in April-May than in 1QGross margin improvement is an important support for 2Q earnings quality.
• Weizimei new project investmentRmb100-150mnUsed to support new initiatives such as cross-selling, foodservice customer expansion, and content e-commerce.
• Post-synergy Weizimei revenue target50-100% YoY growthManagement's target is to drive high revenue growth for Weizimei after synergies are implemented.
• Regular payout ratioAround 65% in 2025Management expects the regular payout ratio to remain relatively stable and rise steadily over the long term.
• Target priceRmb16.0Based on 18x P/E, 2027E EPS, discounted to 2026E using 10% COE.

Impact & implications

If 2Q revenue acceleration, gross margin improvement, and Weizimei synergies are delivered as planned, market confidence in Jonjee Hi-Tech's business recovery and medium-term earnings elasticity may strengthen. If a new ESOP is introduced alongside interim results, it would help improve team incentives and long-term execution; however, the target price is below the marked price on the disclosure page, implying that valuation support still depends on earnings upgrades, channel efficiency, and a better competitive environment.

Risks

• There is still uncertainty around the launch timing, scope of coverage, and incentive effect of the new ESOP.
• Weizimei synergies mainly depend on 2H execution; if cross-selling, foodservice customer expansion, or content e-commerce promotion fall short of expectations, revenue targets may be missed.
• If consumer demand recovery and product mix improvement are weaker than expected, 2Q revenue acceleration and price recovery may be difficult to sustain.
• If channel investment efficiency, distributor recruitment, and inventory management deteriorate, sell-through and margins may be affected.
• If competition in the soy sauce market is more intense than expected, gross margin improvement and price recovery may come under pressure.
• Progress on land proceeds is uncertain, and a special dividend should not be viewed as a certainty.

What to watch

• Whether a new ESOP is launched around the interim results and what its performance targets are.
• Whether 2Q revenue growth, gross margin, and net margin deliver on management's commentary.
• The progress of Weizimei's synergy execution in 2H, including cross-selling through Chubang channels, foodservice customer expansion, and the effectiveness of content e-commerce spending.
• Whether inventory months, end-demand sell-through, and price recovery remain healthy.
• Whether distributor recruitment and channel investment efficiency improve.
• Progress on land proceeds and whether it triggers discussion of a special dividend.