Shanghai Hi-Road Food Technology Co., Ltd. (300915) announced on July 30 that it plans to acquire a 55% stake in Tanghe Food (Kunshan) Co., Ltd. (referred to as "Tanghe Food") for 130 million yuan. Post-transaction, Tanghe Food will become a controlling subsidiary of the listed company and be consolidated into its financial statements.

Tanghe Food is a bakery central factory incubated by the Hema system. Hema is currently advancing a light-asset transformation, and the divestiture of Tanghe Food is part of its broader strategy. For Shanghai Hi-Road Food Technology Co., Ltd., which has just experienced a loss, this acquisition could help the company extend downstream into finished bakery products and access new retail supply chains, offsetting the pressure from its declining core business.

However, Tanghe Food is highly dependent on Hema, and the guaranteed minimum order agreement between the two parties is not a "hard clause." If Hema reduces or terminates its cooperation with Tanghe Food in the future, Shanghai Hi-Road Food Technology Co., Ltd. will undoubtedly face significant pressure.

Why is Shanghai Hi-Road Food Technology Co., Ltd. Acquiring Hema's Tanghe Food?

The target of this transaction, Tanghe Food, is a bakery brand under Hema, primarily engaged in the research, development, production, and supply of bakery products, serving as a supplier for Hema's in-store bakery category. Tanghe Food is a wholly-owned subsidiary of Shanghai Tangduo Technology Co., Ltd., which is 80% owned by Hema (China) Co., Ltd. and 20% by the core management team. Based on the transaction plan, the 130 million yuan consideration corresponds to an overall valuation of the target company of approximately 236 million yuan. In 2025, Tanghe Food achieved revenue of 209 million yuan and a net profit of 18.3945 million yuan. This implies an acquisition P/E ratio of about 12.83 times.

From the seller's perspective, Hema has been advancing its light-asset transformation over the past two years, and the divestiture of Tanghe Food is a part of its overall strategy. From the perspective of Shanghai Hi-Road Food Technology Co., Ltd., as the "first cream stock" in China, it suffered its first loss since listing in 2025. Full-year revenue fell 8.18% year-on-year to 998 million yuan, with a net loss of 18.1281 million yuan. The loss was primarily driven by pressure from both upstream and downstream channels: upstream, the cost of raw materials like palm kernel oil rose; downstream, declining customer traffic at traditional bakery stores led to stalled growth in distribution channels. Over the past three years, Shanghai Hi-Road Food Technology Co., Ltd.'s average net profit was about 98 million yuan. Acquiring Tanghe Food could, on one hand, boost the company's profits. On the other hand, with traditional bakery brands facing multi-dimensional competition from supermarkets, tea and coffee brands, convenience stores, and even instant retail, the acquisition of Tanghe Food could help the company lay out a new retail channel strategy.

However, the risks behind this acquisition cannot be ignored. First, as of the first quarter of 2026, Tanghe Food's net assets were only about 29.87 million yuan, corresponding to a transaction P/B ratio of about 7.9 times. This will create a certain amount of goodwill post-transaction. If future performance falls short of expectations, goodwill impairment will directly impact net profit. Second, the original shareholders have not set any performance commitments. The only agreement is that from the effective date of the agreement to December 31, 2030, the total annual purchase orders (including tax) placed by Hema (China) and/or its affiliates with Tanghe Food must be no less than 210 million yuan. Notably, this agreement is not a "hard clause." Hema has the right to unilaterally reduce the purchase amount if the following circumstances occur: market demand drops more than 20% compared to 2025; Tanghe Food defaults and fails to rectify the issue to Hema (China)'s satisfaction within 30 days of receiving a written notice; Tanghe Food's fault leads to a major food safety incident, negative public opinion, or significant penalties; or Hema (China) and/or its affiliates encounter force majeure or major policy adjustments in their normal operations. Tanghe Food's sales are highly dependent on Hema. If Hema reduces or terminates its cooperation with Tanghe Food in the future, the latter will undoubtedly face significant pressure. Third, as of the end of the first quarter of 2026, Shanghai Hi-Road Food Technology Co., Ltd. had monetary funds of approximately 331 million yuan. The 130 million yuan acquisition cost accounts for 39% of its monetary funds, placing considerable pressure on the company for this cash acquisition.

Can Production Expansion and Acquisitions Rebuild the Growth Engine for Shanghai Hi-Road Food Technology Co., Ltd. Amid Declining Demand in Traditional Bakery Channels?

Shanghai Hi-Road Food Technology Co., Ltd. is a leading player in the domestic bakery cream sector, but it suffered its first annual loss since listing in 2025. Full-year revenue was 998 million yuan, down 8.18% year-on-year. The company's net profit attributable to shareholders turned from profit to loss, with a full-year loss of 18.1281 million yuan, and the non-recurring loss widened further to 29.9348 million yuan. The company's performance is highly dependent on its cream category, which accounted for about 93% of total revenue in 2025. Other categories like chocolate, jam, and flavors and fragrances accounted for only 6.89% combined. In terms of channel model, the distribution channel remains the core, contributing about 74% of revenue. In 2025, the overall revenue from the cream category declined by 7.89% year-on-year, with revenue from the distribution channel dropping sharply by 15.89% year-on-year, making it the main drag on performance.

The core reason for the revenue decline is the shrinking demand from traditional bakery channels. The primary customers of the traditional distribution network are mom-and-pop shops and regional small-to-medium-sized bakeries. In recent years, the rapid rise of new channels, such as chain bakery brands, in-store supermarket bakeries, cross-border bakery offerings from tea and coffee shops, convenience stores, and instant retail, has continuously diverted customer traffic and orders from traditional stores. This has led to shrinking demand and accelerated market clearance of small-to-medium bakeries, directly impacting the upstream distribution system. Meanwhile, the health trend among consumers is also squeezing the space for traditional products. Growing consumer concerns about trans fatty acids are driving end-demand towards healthier categories like natural dairy fats and animal fat-based creams. The company's traditionally advantageous products, such as vegetable fat and dairy-containing vegetable fat creams, face long-term pressure from declining demand. Beyond demand-side pressure, significant cost fluctuations have further amplified profitability pressures. In 2025, the price of the core raw material, palm kernel oil, rose sharply, directly increasing the production cost of dairy-containing vegetable fat cream. The full-year gross profit margin fell to 24.51%, a steep decline of 10.52 percentage points from 35.03% in 2024, becoming a direct driver of the annual loss. In the first quarter of 2026, with raw material prices marginally retreating, the company's operations showed a phased recovery. During the period, it achieved revenue of 271 million yuan, a year-on-year increase of 13.09%; net profit attributable to shareholders was 18.353 million yuan, a year-on-year increase of 153.72%; and the gross profit margin recovered to 30.06%. However, this recovery is more driven by cost reductions, and the deep-seated contradictions between end-demand and channel structure have not been fundamentally resolved.

Against the backdrop of pressure on the core business, the company's capacity expansion continues. In the cream expansion and upgrade project, four UHT aseptic production lines have completed commissioning and sterile validation and entered commercial trial production. Once fully operational, they will add 80,000 tons of capacity for bakery tea cream and plant-based protein beverages, primarily targeting the capacity needs of mid-to-high-end products like light cream. Combined with the previously operational Guangdong Yuehaishen South China production base (60,000 tons of capacity) and the second production line at the India factory, the company's overall production capacity has surged in the short term. The core logic behind the company's aggressive expansion is to bet on the consumption upgrade trend for mid-to-high-end products like light cream, attempting to offset the decline of traditional vegetable fat cream through product structure upgrades. However, the domestic light cream market is already a fiercely competitive red ocean. Imported brands, leveraging their dairy source advantages and end-consumer recognition, have long dominated the high-end market. Domestic leading dairy companies are also making cross-border moves, leading to increasingly intense competition for incremental market share. Shanghai Hi-Road Food Technology Co., Ltd.'s channel strengths remain concentrated in small-to-medium-sized bakeries. Its direct sales capabilities for chain clients and new retail channels are still in the cultivation phase, creating significant uncertainty regarding the digestion progress of the new capacity. As the investment projects are gradually converted to fixed assets, substantial depreciation expenses will continue to erode profits. If capacity utilization remains low for an extended period, it could become a new profit burden.