Goldman Sachs has issued a research report assigning a "Buy" rating to WL DELICIOUS (09985), with a 12-month target price of HK$13.9. This valuation is based on a 19x 2027 forward P/E ratio, discounted back to 2026 at an 8.6% cost of equity. Despite intense competition in the snack industry, the firm expects WL DELICIOUS to sustain growth due to: 1) first-mover advantages leveraging nationwide coverage and resources; 2) smaller competitors facing greater cost and pricing pressures due to scale disadvantages; and 3) the company’s strong brand recognition and expertise in konjac and seaweed products, enabling potential improvements in consumer penetration, channel expansion, and product variety.

1. **Reaffirmed Full-Year Guidance**: Sales growth of 15-20% YoY, gross margin of 46-48%, and net profit margin of 17-20%. SG&A expenses are expected to rise in H2 due to increased marketing investments, particularly for konjac and seaweed products—key growth categories aimed at boosting brand equity and market share. The long-term target is a gross margin above 45% and net profit margin exceeding 15%.

2. **Q3 2025 Trends**: Performance remained solid despite a high base, though growth rates may fluctuate compared to H1. The sesame-flavored konjac product achieved monthly sales of RMB 60-70 million in August-September, while seasoned noodle products stabilized, even showing YoY growth in some months.

3. **Channel Insights**: - Discount stores remain the fastest-growing channel, projected to contribute 25-30% of annual sales, with a long-term target of 30-35%. - Profitability ranking: Traditional distributors lead, followed by discount stores, KA chains, and e-commerce. Discount stores maintain stable operating margins but face fierce competition, favoring partnerships with high-turnover brands like WL DELICIOUS. Rapid store expansions by these partners present growth opportunities.

4. **Raw Material Costs**: Konjac flour prices stayed elevated last year due to supply-demand imbalances, but normalization is expected by 2026-2027 as cultivation expands.

5. **International Expansion**: Management reiterated a full-year overseas sales target of ~RMB 100 million, with progress in securing shelf space for konjac and seaweed products at major Southeast Asian retailers like 7-11 and Lotus’s. Partner searches in the region continue.