UBS: Shandong Dong-E E-Jiao (000423) Q1 2026 Review - In-Line Results, Improved Cash Flow
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Shandong Dong-E E-Jiao reported first-quarter results that broadly aligned with market expectations. Revenue reached RMB 1.81 billion, representing a 5.5% year-over-year increase, while recurring net profit grew 7.7% to RMB 448 million. A standout performer was the consumer health segment, which recorded a revenue growth rate exceeding 50%. This expansion was bolstered by a successful partnership with Sam's Club, where a new Ejiao Astragalus powder product generated RMB 47 million in sales during the quarter and is projected to surpass RMB 100 million for the full year.
Overall gross margins improved by 1.9 percentage points to 75.5%, reflecting favorable product mix optimization. However, operating leverage was partially offset by a 1.2 percentage point increase in the selling expense ratio. A significant operational improvement was evident in cash flow metrics; operating cash inflow reached RMB 28.9 million, marking a substantial recovery from a RMB 304 million outflow recorded in the first quarter of 2025. Channel inventory levels remain healthy at roughly three to six months.
UBS maintains a Buy rating with a 12-month target price of RMB 77.50, derived from a discounted cash flow valuation applying a 6.9% weighted average cost of capital.