Zhongmin Baihui Retail Group Limited: HY2026 Financial Analysis and Outlook

Zhongmin Baihui Retail Group Limited, a Singapore-incorporated investment holding company with core operations in China’s department store and retail sector, has presented its condensed consolidated interim financial statements for the six months ended 31 December 2025 (“HY2026”). This review provides an in-depth analysis of the company’s financial performance, key metrics, and forward-looking commentary, aimed at investors and market watchers.

Key Financial Metrics and Performance Table

Historical Performance Trends

• Revenue: Modest YoY growth (+2.0%), largely driven by increases in direct sales (notably Maotai products) and managed rental, offset by declines in concessionaire sales (-17.8%) and rental income (-13.9%).
• Gross Profit: Despite higher revenue, gross profit declined by 5.1% due to contraction in overall gross margin (24.7% to 23.0%), mostly from lower margins in gold and Maotai products.
• Net Profit: Halved YoY, mainly due to the absence of a one-off gain from lease de-recognition present in the prior period, and the decline in gross profit.
• EPS: Mirrored net profit trends, with a 51.6% YoY drop.

Cash Flow and Balance Sheet Highlights

• Operating Cash Flow: Strong at RMB 80.0 million, aided by working capital improvements.
• Investing Activities: Net inflow of RMB 9.2 million, with investments in property, plant, and equipment (RMB 2.6 million), and a joint venture (RMB 5.1 million), offset by dividend receipts and fixed deposit withdrawals.
• Financing Activities: Net outflow of RMB 39.7 million, reflecting repayments of loans and lease liabilities, and dividend payments.
• Cash Position: Cash and cash equivalents rose sharply from RMB 42.2 million to RMB 131.0 million, driven by operating cash flow and investing inflows.
• Leverage: Loans and borrowings decreased by RMB 1.8 million; lease liabilities also declined due to repayments.

Exceptional Items and Noteworthy Events

• No material asset revaluations or delays were disclosed.
• Share buybacks continued, with treasury shares rising marginally to 4,690,600 (2.45% of issued shares).
• No interim dividend was declared for HY2026, as the board has decided to conserve cash for business activities.
• Significant related-party transactions were noted, particularly with Quanzhou Zhongmin Baihui Shopping Co., Ltd, including management fees, concessionaire income, and other operational flows.
• The Group launched its third mall in Shanxi Province in January 2026, expanding managed GFA to over 700,000 sqm.

Macroeconomic and Industry Environment

China’s real GDP grew by 5.0% in 2025, with retail sales of consumer goods (ex-auto) up 4.4%. However, department store sales grew just 0.1%, highlighting a tough environment. Management expects retail conditions to remain challenging in the near term and has implemented cost control measures to improve efficiency.

Chairman’s Statement

“The retail environment remains challenging and is expected to persist in the near term. The Group has implemented cost control measures to improve operating efficiency.”

The tone of the Chairman’s statement is cautious and pragmatic, reflecting awareness of the continued pressures in the broader retail sector, despite internal operational adjustments.

Dividend Policy and Share Actions

• No interim dividend declared for HY2026.
• Share buybacks continued, but no new share placements, dilution, or mandates were disclosed.

Conclusion & Investment Recommendation

The overall financial performance for HY2026 appears neutral to slightly weak. While the company managed to grow its top line modestly, profitability and margins have come under pressure, and the absence of a dividend signals management’s conservative stance in the face of a tough retail climate. Liquidity has improved, and leverage is stable, but the sector outlook and company commentary suggest continued operational headwinds.

• If you currently hold the stock: Investors should consider holding, but monitor closely. The company remains cash generative and is controlling costs, but ongoing margin pressure and the challenging retail outlook may continue to weigh on earnings. If the macroeconomic or sector environment worsens, or if margins continue to contract, a re-evaluation may be warranted.
• If you do not currently hold the stock: Caution is advised before initiating a new position. Wait for signs of margin stabilization, a return to profit growth, or an improved outlook for China’s department store sector. The expansion into a third mall offers some growth potential but is not yet reflected in improved profitability.

Disclaimer: This analysis is based solely on the company’s published financial statements and does not constitute investment advice. Investors should conduct their own due diligence, consider their risk tolerance, and consult with a financial advisor before making any investment decisions.

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