Goldman Sachs: Pre-Fabricated Foods Q1 Demand Recovers, Competition Turns Rational; Optimistic on Anwell H and Ligao, Watch Out for Rising Costs

Overview

This report summarizes Goldman Sachs’ coverage of China’s consumer staple pre-fabricated food sector’s performance and outlook for the first quarter of 2026. Overall, the sector shows a pattern of ‘revenues exceeding expectations but gross margins varying,’ driven mainly by steady demand recovery and a more rational competitive environment. Despite a complex macroeconomic backdrop, leading companies demonstrate strong resilience in their B2B customer base and new product launches. Goldman Sachs is optimistic about the sector’s quarter-on-quarter improvement trend and particularly recommends Anwell Foods (H-shares) and Ligao Foods, while reminding investors to closely monitor cost increases eroding profit margins and sustainability of growth.

Core views

In terms of performance, companies covered in the report showed significant divergence between Q4 2025 and Q1 2026. Anwell Foods and Qianwei Yangchu exceeded expectations, while Ligao Foods and Qianwei Yangchu fell short of forecasts in some metrics. Overall revenue growth was better than expected, but gross margins varied widely: negative factors included increased short-term expenses from investments in emerging channels (such as Qianwei Yangchu’s e-commerce) and the introduction of new and old customers (such as Ligao Foods); positive factors came from scale effects, eased competition (Anwell Foods), and optimization of product mix and efficiency improvements (Sanquan Foods). In terms of demand and competition, industry demand is steadily recovering (Anwell Foods), though Sanquan Foods and Ligao Foods believe that a full rebound has yet to be realized. Among B2B customers, large catering clients show greater resilience, while small B2B catering channels outperform the broader market (Qianwei Yangchu, Sanquan Foods). The competitive landscape is moving toward rationality—Anwell Foods and Qianwei Yangchu both report that competition is becoming more reasonable, although some categories still face pricing pressures (for example, Sanquan Foods faces year-on-year price cuts but has improved profitability through new products and efficiency gains). In terms of growth engines and overseas expansion, new customers and new products are key drivers. Companies are increasingly partnering with reformed KA supermarkets or large B2B chain customers (Sanquan Foods, Ligao Foods, Qianwei Yangchu). Offline retailers are increasingly adopting baked goods/customized products to counter the impact of discount stores and membership clubs. In addition, raw material procurement costs remain stable overall, but due to tensions in the Middle East, costs for edible oils, cardboard boxes, and inner bags have begun to rise. On the overseas expansion front, Qianwei Yangchu plans to start production in Malaysia in September 2026, and Anwell Foods is exploring overseas M&A or joint ventures; its halal brand “Anzhai” aims for sales of 200 million yuan this year. In terms of valuation and ratings, Goldman Sachs maintains a buy rating on Anwell Foods (H-shares) with a target price of HK$98.0 (based on a 15% discount to A-share valuation); it keeps a buy rating on Ligao Foods with a target price of RMB44.0 (based on a 19x PE multiple of 2027 EPS); it maintains a buy rating on Angel Yeast with a target price of RMB45.6 (20x PE); it keeps a neutral rating on Anwell Foods (A-shares) and Sanquan Foods; and it maintains a sell rating on Qianwei Yangchu.

Analysis framework

Goldman Sachs’ analytical logic is based on ‘fundamental verification + marginal change tracking.’ First, by comparing actual financial reports of covered companies with market expectations, it identifies widespread revenue overperformance and structural differentiation in gross margins, thus judging the true health of the industry. Second, it deeply explores qualitative feedback from company management on channel structures (large B vs. small B), competitive strategies (price wars vs. value-based competition), and cost pass-through capabilities, thereby verifying whether the industry is shifting from ‘wild growth’ to ‘rational competition.’ Finally, combining forward-looking indicators such as raw material price fluctuations and overseas capacity deployment, it assesses the sustainability of future profit margins and the potential for a second growth curve, concluding that ‘we’re optimistic about quarter-on-quarter improvement but wary of long-term uncertainties.’

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Supply-Demand Framework

  The report analyzes upstream raw material prices (oil, packaging materials) and downstream demand recovery in foodservice and retail channels to determine the direction of industry prosperity. For example, it points out that demand is steadily recovering while supply-side competition is becoming more rational, supporting an optimistic view of the sector’s fundamentals.

• Valuation MethodologyPE/PEG valuation

  Relative Valuation (PE Multiple)

  The report uses different price-to-earnings (PE) multiples for different targets. For example, Anwell H-shares are given a 15% discount relative to A-shares, while Ligao Foods is valued at 19x PE based on its average PE over the past two years. This reflects the logic behind pricing differences among similar assets under different market liquidity or risk preferences.

• Event Game Theory and Behavioral FinanceExpectation Gap/Expectation Management

  Expectation Gap Analysis

  The report begins by pointing out that some companies ‘exceeded expectations’ or ‘fell short of expectations,’ which is a typical expectation gap analysis approach. Analysts capture potential stock price momentum by comparing actual performance with consensus market expectations and adjust ratings or target prices accordingly.

Asset mapping & comparison

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

• Anwell Foods (603345.SS / 2648.HK)

  Core beneficiary—revenue exceeded expectations, strong B2B recovery, and rational competition directly benefit its leading position.

  Strengths

  Fresh Lock Pack series revenue exceeds 1.7 billion yuan, foodservice channels regain confidence, and customized products contribute incremental growth.

  Weaknesses

  A-share valuation is relatively high; although H-shares are cheaper, they are constrained by overall market sentiment.

  Comparison

  Compared to peers, Anwell has stronger brand power and channel penetration in frozen rice and noodles and pre-fabricated dishes, with higher earnings certainty.

  Risks

  Food safety issues, sharp rise in raw material costs, and renewed deterioration in industry competition.

• Ligao Foods (300973.SZ)

  Buy rating—benefits from bottom-up recovery in bakery channels and growth in KA customer sales.

  Strengths

  Small regional KA sales grew by over 50%, UHT cream line revenue grew by 20%+, and new products (PRO series) performed well.

  Weaknesses

  Net profit declined by 28% in Q1, mainly affected by the end of raw material hedging positions and investments in new channels.

  Comparison

  Compared to peers focused on quick-frozen reheatable foods, Ligao has deeper moats in baking ingredients and dough, but is more affected by raw material price volatility.

  Risks

  Bakery store channel recovery slower than expected, sales pressure from KA customers, and rising raw material costs.

• Qianwei Yangchu (001215.SZ)

  Sell rating—although revenue exceeded expectations, net profit margin is under pressure, and it operates in a fiercely competitive niche segment.

  Strengths

  Large B2B channels recovered noticeably, small B2B catering channels remain stable, and overseas capacity deployment leads the way.

  Weaknesses

  Net profit margin rose only slightly in Q1, facing pressure from rising logistics and packaging costs, and e-commerce channel investments dragged down gross margins.

  Comparison

  Compared to Anwell, Qianwei relies more on foodservice B2B, with slightly weaker risk resistance; compared to Ligao, its product range is more concentrated on foodservice customization.

  Risks

  Geopolitical factors globally cause fluctuations in oil and cold-chain transportation costs, and overseas factory operations fall short of expectations.

• Angel Yeast (600298.SS)

  Buy rating—benefits from capacity release and stable domestic demand for baking yeast.

  Strengths

  Strong industry leadership position, controlled pace of capacity expansion.

  Weaknesses

  If domestic demand for baking yeast falls short of expectations, growth will be affected.

  Comparison

  As an upstream raw material supplier, its cyclicality is weaker than midstream food processing companies, but it is also affected by the risk of overcapacity.

  Risks

  Rapid capacity expansion could lead to oversupply, and rising costs squeeze gross margins.

• Sanquan Foods (002216.SZ)

  Neutral rating—strong brand power but facing ongoing price pressure and growth bottlenecks.

  Strengths

  Through product portfolio optimization, 2C channels achieve profit growth, and small B2B catering channels return to modest growth.

  Weaknesses

  Revenue grew by only 11% in Q1, net profit margin stagnates, and it faces continuous year-on-year pricing pressure.

  Comparison

  Compared to Anwell, Sanquan has weaker penetration and customization capabilities in foodservice B2B, relying more on traditional retail channels.

  Risks

  Foodservice channel growth slows down, new products underperform, and fierce market competition drives down gross margins.

Key data

• Anwell Foods Q1 2026 Revenue YoY+31%Significantly exceeded expectations, largely driven by the recovery of foodservice demand and 30% growth in Frozen prepared foods
• Qianwei Yangchu Q1 2026 Revenue YoY+24%Exceeded expectations, driven by the recovery of large B2B channels, mainly due to the shift in timing of the Spring Festival
• Ligao Foods Q1 2026 Net Profit YoY-28%Fell short of expectations, mainly affected by the end of edible oil hedging positions and investments in new channels
• Anwell Foods H-Shares Target PriceHK$98.0Calculated based on a 15% discount to A-share valuation
• Qianwei Yangchu’s Malaysian Plant Start DateSeptember 2026Designed to serve local customers and shorten delivery times

Impact & implications

For investors, this means the pre-fabricated food sector has passed the most intense phase of price wars and entered a period of quality growth driven by efficiency and new products. Anwell Foods and Ligao Foods, with their advantages in securing large B2B customers, customization capabilities, and cost control, are likely to continue outperforming the industry average growth rate. However, rising raw material and logistics costs caused by geopolitics represent a potential headwind—if companies cannot fully pass these costs onto consumers through price hikes, profit margins will come under pressure. Moreover, while overseas expansion offers long-term growth potential, it contributes little to profits in the short term and carries execution risks.

Risks

• Rapid rise in raw material (edible oil, packaging materials) and logistics costs erodes gross margins.
• Macroeconomic weakness causes foodservice and retail demand recovery to fall short of expectations.
• Industry competition intensifies again, triggering irrational price wars.
• Food safety issues trigger brand crises.
• Overseas expansion (such as the Malaysian plant) faces operational, compliance, and market acceptance risks.
• Major shareholders reduce their stakes.

What to watch

• The sustainability of gross margin recovery starting from Q2 2026 (whether efficiency improvements can sustain margins after the base effect weakens).
• Trends in raw material prices and companies’ ability to pass costs onto consumers (how price hikes are implemented).
• The pace of new openings and order frequency changes among large B2B customers (such as fast-food chains and chain restaurants).
• Actual production progress of overseas factories (such as Qianwei Yangchu’s Malaysian plant) and local market response.
• Changes in the share of sales from emerging channels (such as e-commerce, community group buying, hard discount stores).