Shiyue Daotian reaps profits on bumper move to corn

The grain seller’s record corn sales were the highlight of its 2024 results, underscoring the brand’s potential to hop on the healthy food bandwagon

Key Takeaways:

• Shiyue Daotian recorded a net profit of 204 million yuan in 2024, swinging back to the black after three years of losses
• Revenue from the grain seller’s corn products surged 5.3 times last year to 815 million yuan, accounting for 14% of its total

By Lee Shih Ta

October symbolizes the harvest season in China, often described as “Golden October” for the golden fields of ripened grains that come with the fall. Shiyue Daotian Group Co. Ltd. (9676.HK), a Northeast Chinese company whose name means “October rice fields,” offered a similar financial bounty in its latest annual results published late last month.

A popular Chinese proverb says that food is everyone’s first necessity, and today’s consumers are adding a new appendix to that with their growing demand for both quality and healthy choices. No longer is simply having enough to eat satisfactory, overtaken by the desire to eat well and safely.

Such a mindset is fueling the rapid rise of mid- to high-end rice and whole-grain products over an older generation of cheaper but highly processed staples. Leveraging the fertile black soil of Northeast China where it’s based, Shiyue Daotian has branded and sold its hometown rice across the nation over multiple channels, both online and offline. Through such efforts it’s earned a reputation as a popular brand of premium rice.

That reputation paid dividends last year, as Shiyue Daotian harvested 5.75 billion yuan ($790 million) in revenue, up 18% from 2023, according to its annual results. In that process, it returned to the black after three years of losses, recording a 204 million yuan profit last year, versus a loss of 64.86 million yuan in 2023. An improved gross margin that rose from 12.7% in 2023 to 17.7% last year was a major factor lifting it back to the black. Rice contributed 69.9% of its total sales, up 4.8% to 4.01 billion yuan.

Popping corn

Despite the dominant contribution from rice, corn was the real superstar in the latest report. Revenue from corn products increased more than sixfold year-on-year from 130 million yuan in 2023 to 815 million yuan for 2024, boosting its share of the company’s revenue pie from just 2.7% to 14.2% over that period.

As health awareness grows in China, consumers are increasingly embracing whole grain foods and nutritionally balanced diets. That’s where corn has an advantage, emerging as a preferred choice on contemporary dining tables due to its low fat and high fiber content. Shiyue Daotian has seized on this shift by repositioning corn from a simple traditional staple to a healthy grain that it packages and sells as fast-moving consumer goods (FMCGs) snacks that represents a new category for the company.

Shiyue Daotian has wholeheartedly embraced the growing popularity of corn by launching more than 30 related products like corn cobs, corn segments, corn kernels, yellow glutinous corn, white glutinous corn and fruit corn. Its cumulative sales of yellow glutinous corn alone exceeded 13 million units through March on Douyin, the Chinese version of TikTok.

Restructuring sales channel

Shiyue Daotian also stands out from the crowd of state-run enterprises and more established brands for its unconventional sales channels. Seizing on the latest online sales trends, the company has partnered with influencers to reach consumers using livestreaming e-commerce channels. As its products gained recognition, it expanded its efforts into self-operated online stores.

The company’s annual results show that revenue from e-commerce platforms fell to 41.6% of its total last year from 58.4% in 2023. But revenue from self-operated online stores more than doubled to 21.1% of the total from 9.6%. Supermarket channel revenue also climbed to 17.6% from 13.4%. Such diversification efforts helped to boost the company’s gross profit by 64.8% to 1.02 billion yuan in 2024, as its gross margin rose 5 percentage points.

Despite the improved performance, Shiyue Daotian still faces potential risks. One of the biggest is its heavy reliance on rice, which faces slowing growth due to market saturation and rising imports. While its 4.8% growth in rice sales last year looks relatively strong in such an environment, some of that owes to the company’s ongoing shift to more mid- to high-end rice products that typically carry higher margins to its product mix. While corn products provide some diversification, they also come with their own potential volatility.

Some of the company’s investments, including its stake in bubble tea chain Baicha Baidao (2555.HK) are also causing headaches. According to its midyear report last year, Shiyue Daotian spent 360 million yuan to acquire 22.32 million Baicha Baidao shares for HK$17.50 each on the day of the bubble tea chain’s Hong Kong IPO in April last year. The stock plunged 38% on its first trading day, and has generally been weak since then, costing Shiyue Daotian 160 million yuan so far. Shiyue Daotian didn’t even mention Baicha Baidao in its annual report for 2024, even after touting it as a major investment in its midyear report.

Shiyue Daotian’s own shares haven’t done so well either, losing nearly two-thirds of their value since their October 2023 IPO, including a 6.8% decline since the announcement of its latest results.

Rivals such as Jinjian Cereals (600127.SH) and Beidahuang (600598.SH) all boast strong origins and state-owned background but lag in modern branding and connections with contemporary consumers. Meanwhile, Three Squirrels (300783.SZ), Bestore (603719.SH) and other emerging snack brands have a stronger e-commerce advantage and high awareness, but lack expertise in staple food products.

Shiyue Daotian currently trades at a price-to-earnings (P/E) ratio of about 29.5 times, higher than Beidahuang’s 22.4 times and Three Squirrels’ 28.4 times, reflecting improving confidence in the company’s prospects. The prepackaged staple food market that is Shiyue Daotian’s bread-and-butter is in a state of upgrades and transformation, as consumers increasingly focus on health attributes and brand image of the food products they buy. With its established brand and supply chain, Shiyue Daotian may have greater growth potential than its peers if it can keep adjusting its product mix to keep up with the latest consumption trends.

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