Yihai Kerry Arawana's Surging Attributable Profit and Strategic Acquisitions: A Case for Long-Term Growth in China's Edible Oil Sector

China's edible oil and food sector has long been a battleground for companies balancing commodity volatility, consumer preferences, and supply chain complexity. Yet, Yihai Kerry Arawana Holdings Co., Ltd (SZSE:300999) has emerged as a standout performer, posting a staggering 60.1% year-over-year net profit increase in the first half of 2025. This surge, coupled with a series of strategic acquisitions, underscores the company's ability to navigate macroeconomic headwinds while positioning itself for sustained growth in a recovering market. For investors seeking exposure to China's industrial and consumer demand renaissance, Yihai Kerry Arawana's playbook offers a compelling case study.

Profit Surge: A Mix of Volume, Pricing, and Efficiency

Yihai Kerry Arawana's H1 2025 net income of CNY 1.76 billion reflects a dramatic turnaround from a 12.1% decline in 2024's preliminary results. The company's revenue rose 6% year-on-year to CNY 115.7 billion, driven by robust sales in its core edible oil, flour, and food products segments. While granular cost-cutting measures are not disclosed, the earnings-per-share (EPS) jump from CNY 0.20 to 0.32 suggests improved operational leverage. This performance aligns with broader trends in China's consumer sector, where pent-up demand for packaged goods and convenience foods is accelerating post-pandemic.

Strategic Acquisitions: Strengthening the Supply Chain

The company's recent acquisitions highlight its focus on vertical integration and market control. In February 2025, it acquired a 60% stake in Yihai Chenke Agriculture Co., a move aimed at securing raw material sourcing and reducing dependency on external suppliers. Separately, in August 2024, it increased its ownership in Shenzhen Delion Food Co., Ltd to 95%, enhancing its foothold in the premium food segment. These acquisitions are not merely about scale—they reflect a calculated strategy to mitigate supply chain risks and capture higher-margin opportunities in downstream processing.

While the immediate attributable profit contribution from these acquisitions remains unspecified, their long-term value is evident. By consolidating agricultural and food production assets, Yihai Kerry Arawana can stabilize input costs, a critical advantage in a sector prone to price swings. For instance, the integration of Yihai Chenke Agriculture could insulate the company from soybean price volatility, a persistent challenge for edible oil producers.

Operational Resilience in a Competitive Landscape

China's edible oil market is highly fragmented, with intense competition from both domestic and international players. Yihai Kerry Arawana's ability to maintain profit margins amid this rivalry speaks to its operational resilience. The company's Smartkarma Smart Scores—particularly in “value” and “growth”—underscore its strong balance sheet and scalable business model. Additionally, its proposed joint venture with Chongqing Port in June 2024 signals a push into logistics and distribution, further solidifying its supply chain dominance.

Investment Implications: A Buy for the Long Haul

For investors, Yihai Kerry Arawana's performance raises two key questions: Is the profit surge sustainable, and can the company replicate its success in new markets? The answer lies in its dual focus on cost discipline and strategic expansion. While the 60.1% H1 growth may partly reflect a low base effect (due to 2024's decline), the company's acquisition-driven diversification and operational improvements suggest a durable growth trajectory.

The stock currently trades at a forward P/E of 12x, a discount to its five-year average of 15x, offering a margin of safety for long-term investors. Given China's demographic tailwinds—urbanization, rising middle-class disposable income, and a shift toward convenience foods—Yihai Kerry Arawana is well-positioned to outperform. However, risks such as regulatory scrutiny in the food sector and global commodity price shocks warrant cautious optimism.

Conclusion: A Strategic Bet on China's Consumer Renaissance

Yihai Kerry Arawana's 60.1% profit surge and strategic acquisitions are more than quarterly wins—they are part of a broader narrative of operational reinvention. By securing supply chains, expanding into premium segments, and leveraging China's recovering consumer demand, the company is building a moat against industry headwinds. For investors with a multi-year horizon, this is a compelling opportunity to capitalize on the intersection of macroeconomic recovery and corporate execution.