Nuts/Seeds in spotlight on easing competition & channel disruption; Favourable cost outlook; Upgrade Chacha to Buy

Research evidence excerpt

Nuts/Seeds in spotlight on easing competition & channel disruption; Favourable cost outlook; Upgrade Chacha to Buy

Equity Research

7 July 2026 | 8:32PM HKT

CHINA SNACKS

Nuts/Seeds in spotlight on easing competition & channel disruption;

Favourable cost outlook; Upgrade Chacha to Buy

Since we downgraded Chacha to Sell on 1 Feb 2024, the share price has declined Valerie Zhou

+852-2978-0820 | valerie.zhou@gs.com

36% vs. SSE 300 index up +51% and MSCI China Staple index of -12%. We believe Goldman Sachs (Asia) L.L.C.

Chacha’s underperformance was largely in line with our downgrade thesis: 1) Leaf Liu

Channel disruption and intensifying competition: Traditional distributor-led sales +852-3966-4169Goldman Sachs (Asia)| leaf.liu@gs.comL.L.C.

channels were disrupted by the rapid rise of emerging channels (i.e. valuer retailers - Christina Liu

see our note back to 2024) and aggressive market share gains from closest peers like +852-2978-6983Goldman Sachs (Asia)| christina.liu@gs.comL.L.C.

Three Squirrels and smaller merchants on Douyin and value retailers; 2) Elevated

raw material costs in 2025: Profitability came under pressure due to higher

sunflower seed costs following abnormal rainy weather, rising nut prices, and weaker

pricing power that limited the company’s ability to pass through cost inflation.

We upgrade Chacha to Buy from Sell (TP at Rmb22.5, implying 20% upside) as we

are turning more constructive on the aforementioned headwinds. We believe the

company is in an earnings recovery phase and forecast NP growth of 120% YoY and a

4.3ppt expansion in NPM in 2026E. In addition, we see potential for the payout ratio

to increase from approximately 60% currently to around 80% over the longer term,

supported by a healthy 8-10% free cash flow yield.