China Fortune News on November 8 (Reporter Fang Yanbo) Benefiting from the significant decline in major raw material prices such as corn and protein, in the first three quarters of this year, the leading enterprise in corn oil, Xiwang Foodstuffs (000639.SZ), saw a year-on-year growth of over 8 times in performance. As we enter the fourth quarter, how is the company's production and sales situation? How will the company layout under the sluggish consumer market? Where are the new growth points in performance?

"The fourth quarter is the peak season, sales of small-packaged corn oil will further increase compared to the third quarter, and overall plant oil production and sales volume will also increase further." Sun Xingu, Vice Chairman of Xiwang Foodstuffs, said in an interview with China Fortune News that the second half of the year is the peak season for oil fats. Currently, the price of raw material germs is still low compared to the same period last year, and with the increase in production and sales volume, it is expected that the company's earnings from corn oil in the fourth quarter will further improve.

As one of the company's dual core businesses, the sports nutrition business has also started to grow steadily, "Our sales network has been fully established, and the next step is for costs to gradually decrease, with a significant increase in gross profit margins." Sun Xingu introduced that the company plans to enter the light sports and weight loss markets by launching high-margin new products. Currently, the subsidiary, Aoweite, is developing new product categories in the comprehensive sports and health food sectors, and has already entered the product introduction phase, aiming to develop 2-3 major products within two years.

Oil and fat business: Corn oil market share ranks first in the industry, plans to expand rapeseed oil business scale.

Corn oil is Xiwang Foodstuffs' traditional business, with main products including fresh germ corn germ oil, corn germ oil, as well as rapeseed oil, sunflower seed oil, peanut oil and other healthy oil varieties. At present, Xiwang Foodstuffs holds a leading position in the segmented market of corn oil, with a market share of over 30%, being the leading enterprise in the corn oil small-category oil types.

In the first three quarters of this year, due to the significant decline in the prices of the major raw material corn germs, Xiwang Foodstuffs' performance increased by over 8 times. "Currently, the price of corn germs is around 3000 to 4000 yuan per ton, a decrease of about 40% compared to the peak last year." Sun Xingu explained that the price of germs is mainly influenced by the supply and demand relationship of oil fats. Last year, the prices of bulk oil fats were relatively high, and this year, prices decreased in the first half of the year.

Zhuo Chuang Information analysis report shows that in the first half of the year, including soybean oil, palm oil, and rapeseed oil, the domestic three major plant oil supplies exceeded demand, and the oil price index is on a downward trend. By the end of June, the average oil price index in the first half of the year was 89.76 points, a decrease of 13.11 points compared to the previous month and a decrease of 15 points year-on-year. In the third quarter, palm oil and rapeseed oil prices were fluctuating and biased towards strength, while soybean oil first fell and then rose under the background of costs and oversupply, running weak overall.

In terms of production and sales volume, as New Year's Day and the Spring Festival stocking season approaches, "the second half of the year is the peak season for the oil industry, with production and sales volume accounting for 60% of the whole year, while the first half of the year accounts for 40% of the production and sales volume. The company's production and sales volume in the third quarter of this year increased by about 20% compared to the second quarter, and it will be even better in the fourth quarter." Sun Xinguo said.

But Sun Xinguo also said that corn oil is a substitute oil with a relatively small industry scale. The annual sales volume in China is only hundreds of thousands of tons. For listed companies to grow bigger and stronger, they need to find new profit growth points. Currently, Xiwang Foodstuffs plans to increase the business scale of rapeseed oil. "Rapeseed oil is one of the top three domestic oil varieties and has a relatively large market in the south. In the first three quarters of this year, our rapeseed oil business revenue has grown significantly, with a year-on-year growth of approximately over 15%."

Sports nutrition business: Broadening user base and product transformation.

Since the acquisition of the globally renowned sports nutrition and weight management company Oxit by Xiwang Foodstuffs in 2016, the sports nutrition business has become the company's largest source of profit. In the first half of this year, the revenue from the sports nutrition business accounted for 48.16% of the total revenue of the company, with a gross margin of 30.47%, 4.82 percentage points higher than the vegetable oil business.

"There is a significant room for improvement in the gross margin of sports nutrition products." Sun Xinguo said the company is currently working on reducing costs and improving gross margins through product optimization, controlling raw material costs, saving warehousing costs, and effective control of sales and management expenses.

Sun Xinguo introduced that the company's sports nutrition products are mainly divided into two parts: one part is for fat reduction, with a gross margin of about 60%, but accounts for a relatively small percentage. The company plans to expand the volume of this part; the other part is protein powder, with a gross margin of about 30%. The rise in prices of the main raw material, whey protein, has lowered the gross margin of this part of the products.

"Our products used to focus on muscle growth, with a relatively narrow user base positioning. We are currently developing new products to expand the domestic user base to cover light exercise groups, middle-aged and elderly, and female populations, such as fat-reducing coffee, vitamins, and so on." Sun Xinguo said, the company is currently relying on the muscle technology's North American brand genes and R&D strength to transform its products, develop new product categories in the pan-sports and health products fields, and strive to cultivate 2-3 major products within two years.

Among them, the running energy gel series and the youth sports nutrition series have already entered the product introduction phase. At the same time, product reserves cover middle-aged and female populations. Oxit's Purely Inspired brand has reserved multiple health product approvals, and the preparatory work has been completed. The products are currently in the testing phase.

According to the report by GrandViewResearch, the global sports nutrition market is expected to have a compound annual growth rate of 8.9% from 2023 to 2027. The growth rate in the Chinese market is significantly higher than the global average. Data from iimedia consulting shows that the size of the health food market in China is expected to reach 328.2 billion yuan in 2023 and 423.7 billion yuan in 2027.

Currently, the company's sports nutrition product sales have already covered more than 130 countries and regions. Among them, the fastest-growing markets in China and India will be important growth points for the company's sports nutrition business in the future.

In terms of channels, iOWiit has already started to build live streaming e-commerce channels in China and North America, focusing on core whey protein categories and innovative product forms and functional ingredients by leveraging internet celebrities for promotion. These include the next generation of sports nutrition and weight management products. Leveraging the brand's accumulated audience assets over the past 30 years, and combining current interest-based e-commerce channels, the company is focusing on strengthening its presence through domestic Douyin and North American Tiktok platform channels.