Goldman Sachs: El Niño's impact on Chinese food stocks is mixed, maintaining Weilong's (09985) and Yasui Foods (02648) “buy” ratings

The Zhitong Finance App learned that Goldman Sachs released a research report saying that historical precedents showed that the El Niño phenomenon had an adverse effect on nuts. Sunflower seeds had mixed effects, while konjac was less affected. The bank maintained the “buy” rating of Weilong (09985), with a target price of HK$9.76; the “buy” rating of Yasui Foods H shares (02648), with a target price of HK$86.

According to data quoted by the bank, Africa's drought from 2024 to 25 increased the cost of cashew nuts by 2% to 12%, causing the gross margin of the Qiaqia Food (002557.SZ) nut business to drop 4.4 to 7.5 percentage points; excessive rainfall in Inner Mongolia in September 2024 reduced the supply of high-quality sunflower seeds, boosted procurement costs, and reduced the gross margin of the sunflower seed business of Qiaqia Foods by 5 percentage points in 2025; however, Weilong Yummy and Yanjin Store (002847.SZ) benefited from the efficiency of konjac upgrade Gross margin decreased by only 1.7 percentage points and 2.4 percentage points, respectively, in 2024, and decreased by 1.6 percentage points and increased by 1.2 percentage points in 2025, respectively.

The bank indicates that currently the cost of raw materials is still manageable. US PPI data for August showed that the price of almonds fell 6% year on year and remained the same; the price of tree nuts (including cashew nuts) fell 4% year on year, and the price of pistachios rose 10% year on year, both of which remained the same month on month. Sunflower seed procurement costs fell 18% year on year, despite a 4% month-on-month increase in early September, and the weather conditions in the harvest area were good. US cod prices rose 12% month-on-month in August, and the year-on-year increase slowed to 18% from 40% in July; fish prices in China rose 1% year on year in early September and fell 3% month on month.

Looking ahead to the fourth quarter of 2026 to the beginning of 2027, the bank believes that its coverage of snacks and frozen foods is less exposed to the El Niño-driven agricultural inflation cycle in the consumer goods sector, as sugar, palm oil and soybeans account for less than 10% (in addition to high profits accounting for 30% of the palm oil cost mix), while the bank's consumer goods coverage accounts for 5% to 30%, 6% to 30%, and 10% to 21%. The bank also believes that the competitive landscape may ease, thereby improving pricing capacity (nuts) or new product innovation (konjac, protein products) to help offset cost pressure. However, due to fluctuations in raw material prices, the bank expects investors to pay attention to the raw material cost trends during the fourth quarter of 2026. Among them, sunflower seeds, konjac and pistachios will be harvested from September to October, October to December, and the end of August to October, respectively, while fish paste procurement for Yasui Foods (02648) will begin in October.