As growth slows seasonally, can CHINA PET FOODS still realize its "brand dream"?

The pet economy, as an important direction in the new consumption field, has always carried high growth expectations in the market.

However, as the "leading pet food company," CHINA PET FOODS seems to have fallen short of these expectations in its latest third-quarter report.

In the first three quarters of 2025, CHINA PET FOODS achieved a cumulative operating income of 3.86 billion yuan, a year-on-year increase of 21%.

Looking solely at the third quarter, CHINA PET FOODS' revenue was 1.43 billion yuan, a year-on-year increase of 15.9%, which is a significant decline from nearly 25% growth in the previous two quarters.

The day after the financial report was released, CHINA PET FOODS' stock price fell nearly 6%.

With the increasing pet ownership penetration rate in the domestic market, the pet food industry has shown a clear trend of domestic substitution.

This presents development opportunities for traditional OEM giants like CHINA PET FOODS.

CHINA PET FOODS has established a multi-brand matrix centered around "Wanpy," "Zeal," and "Toptrees," and has set a target of a 27% compound annual growth rate for its domestic sales business over the next three years.

Analyst Chen Shuhui from China Merchants Securities estimates that in the third quarter of 2025, the company's domestic self-owned brand revenue will still maintain a high growth rate of 35%-40%.

Building self-owned brands is not an overnight process.

In 2024, CHINA PET FOODS invested 380 million yuan in business promotion and sales services.

In the first half of 2025, the core brand WANPY signed artist Ouyang Nana as its brand ambassador, increasing the promotion and sales service expenses to 220 million yuan, raising the sales expense ratio.

In the context of gradually diminishing traffic dividends, the return efficiency of marketing investments generally faces challenges.

However, for CHINA PET FOODS, this is still a critical period for competing for market share and consumer mindshare.

The pet staple food market is generally considered to have the potential to move towards high concentration due to its characteristics of high consumption frequency, wide penetration, and strong user stickiness.

Analyst Lei Yi from Huayuan Securities believes that compared to brands relying on OEMs, CHINA PET FOODS, with its own production capacity advantages, can achieve higher gross profit retention internally, thus gaining more initiative and financial flexibility in an industry competition that requires high-intensity marketing investments.

In the first three quarters of 2025, CHINA PET FOODS' gross profit margin increased by nearly 3 percentage points year-on-year, reaching 30.54%.

However, the growth rate of period expenses was comparable.

In addition to increased sales expenses due to domestic and foreign self-owned brand promotion investments, the amortization of employee stock ownership plan expenses and increases in employee compensation led to a nearly 60% year-on-year increase in management expenses.

Combined with the impact of a high investment income base from the same period last year, CHINA PET FOODS achieved a net profit of 330 million yuan in the first three quarters, with a net profit margin slightly decreasing by 0.16 percentage points to 9.32%