Goldman Sachs: Dashenlin (603233) Earnings Review — FY25 and 1Q26 NP both beat due to EBIT margin improving; Buy
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Goldman Sachs notes Dashenlin reported FY25 revenue of RMB 27.5 billion, slightly below the RMB 27.77 billion estimate. However, net profit surged 38% year-over-year to RMB 1.235 billion, beating expectations of RMB 1.11 billion. This earnings surprise was driven by EBIT margin expansion to 7.4%, significantly ahead of the 6.6% forecast. Similarly, 1Q26 net profit reached RMB 511 million, up 9% year-over-year and beating estimates, despite revenue of RMB 6.97 billion falling short of the RMB 7.48 billion projection.
The EBIT margin improvement stems from three key factors. First, operational efficiency has improved in newly entered regions such as Northeast, North, and Northwest China. Second, an increasing share of private label products and lower supply chain costs have boosted gross margins. Third, optimized rent negotiations resulted in approximately RMB 50 million of savings in 2025, with same-store rent declining around 6% in 1Q26.
Capitalizing on favorable policies, Dashenlin plans to resume mergers and acquisitions. Management targets opening 500 directly-operated stores, 2,000 franchised stores, and completing 500 new acquisitions in 2026.
Goldman Sachs raised its 12-month target price to RMB 25 from RMB 24, maintaining a Buy rating. With the stock trading at RMB 17.98, this implies 39% upside.