Prominent fund managers are once again building positions in a leading Chinese condiment maker, even as the broader consumer sector faces prolonged valuation adjustments. Recent public fund semi-annual reports show net reductions across the consumer sector, contrasting sharply with crowded technology trades, yet some portfolio managers are moving against the market trend.

Fund managers including Xiao Nan and Zhang Kun, known for their previous heavy consumer stock holdings, re-established positions in Foshan Haitian Flavouring And Food Company Ltd. (SHA: 603288) during the second quarter. Their actions appear grounded in fundamentals: while the foodservice industry struggled in the first half, the company achieved growth in both revenue and profit, outpacing the sector average. Shareholder returns remain robust with continued high dividend payouts and ongoing share buybacks.

The company has also accelerated its overseas expansion. Haitian completed the acquisition of a 100% stake in Hong Kong-based Amoy Food Limited through its subsidiary Haitian International Investment. This strategic move bypasses the lengthy process of building a new brand and distribution network from scratch, instead granting immediate access to Amoy's mature sales channels spanning over 30 countries and regions, along with localized production capabilities.

Despite steady earnings, thicker dividends, and faster globalization, the company's valuation remains near historical lows. Responding to market pricing, a company representative stated: "Our core competitiveness is actually stronger than it was five or ten years ago. In the long run, there is still room for sustained growth in the seasoning industry. This is a slow but enduring business. We believe that as long as we serve our customers well, the capital markets will eventually recognize our long-term value."

A look at the latest institutional holdings reveals a clear divergence: while northbound capital, index funds, and smaller funds exited during the first half, several active funds were rebuilding positions. By the end of the second quarter, 603 public funds held shares in the company's A-shares, totaling RMB 4.6 billion in market value, representing 2.8% of the free float, with passive index funds accounting for about 60% of heavy positions.

The more notable shift comes from active money. In Q2, Xiao Nan's E Fund Consumer Industry fund significantly increased its stake by 11.70 million shares, making it the largest active equity buyer during the period. Zhang Kun's E Fund Blue Chip Select newly entered with 4 million shares. Liu Yanchun's fund has maintained its position without major changes, though some smaller funds trimmed holdings, the institution remains a significant investor.

Historically, Haitian was once a star stock for public funds. By the end of 2020, its largest holders were Hongde Fund and Jingshun Changcheng, primarily through products managed by Wu Chuanyan and Liu Yanchun, with E Fund holding very little. Zhang Kun previously admitted he never held more than 2% of Haitian and didn't make substantial profits from it. Xiao Nan also missed the previous rally, with his prior allocations never entering core heavy positions until this quarter, when he increased the stake to 4% of net asset value, the highest ever.

In his latest quarterly report, Xiao Nan noted: "Given the current macro environment, we increased allocations to companies with higher overseas revenue proportions, such as autos, two-wheelers, and black appliances, while reducing positions in baijiu companies with governance risks. Companies that can expand overseas revenue and gain market share will be our key allocation targets."

The divergence among institutions remains clear. Northbound capital held 136 million shares at the end of Q2, a reduction of 3.69 million shares quarter-on-quarter, while 138 funds disappeared from the holding list. For H-shares, which trade at a PE of about 18.8 times, a roughly 45% discount to A-shares, active fund interest has noticeably increased. New H-share buyers are primarily from the E Fund group, including funds managed by Yang Siliang and Peng Ke, as well as Dacheng Fund's Liu Xu. Sellers include funds from Anxin, Hua'an, and Zhongou.

From a fundamental perspective, the company delivered a solid first-half performance. Revenue reached RMB 16.15 billion, up 6.01% year-on-year, with net profit attributable to shareholders at RMB 4.19 billion, up 7.13%. Deducted non-recurring items, net profit rose 3.77%. Notably, financial expenses, particularly exchange losses of RMB 480 million, weighed on earnings. Excluding this impact, total profit growth would have been 16.91%, indicating operational improvement actually exceeding the apparent rate.

Looking at the longer term, from 2014 to 2025, revenue grew from RMB 9.82 billion to RMB 28.87 billion, while net profit rose from RMB 2.09 billion to RMB 7.04 billion, representing compound annual growth rates of approximately 10.5% and 11.7%, respectively.

Analysts note that the seasoning industry faces intensifying competition and diversifying downstream demand. The ability to understand and respond to needs across specific consumer segments, scenarios, and channels has become a core competitive advantage. As a leading player, Haitian is accelerating internal adjustments after a period of operational pain, implementing systematic changes across production and sales, with sustained high-quality growth expected. Near-term pressures include slower growth in main categories during Q2, declining gross margins, and rising financial expense ratios. However, with a strong channel and supply chain foundation, margin improvement remains possible if cost pressures ease and main category growth stabilizes.

In terms of shareholder returns, the company has established a system combining dividends, buybacks, and employee stock ownership. For 2025, total cash dividends reached RMB 7.95 billion, a payout ratio of 112.95%. The company has committed to an annual cash dividend payout ratio of no less than 80% of net profit from 2025 to 2027, excluding special dividends. Share buybacks are underway for both A-shares and H-shares, with a planned A-share repurchase of RMB 1-2 billion and over 70% of shares to be cancelled. As of September 11, A-share buybacks totaled 13.34 million shares at a cost of RMB 459 million. H-share repurchases have also commenced, with all repurchased shares to be cancelled.

The company's approach to market pressures is twofold: improving efficiency internally and expanding overseas. While some competitors may raise prices, the company emphasizes caution, preferring to absorb cost pressures through internal optimization, including long-term supplier partnerships and technological advancements from its "Lighthouse Factory." The company's self-developed "AI Bean Face" technology processes over 13,000 soybeans per second, enabling full-process AI automation that leads the industry in per-capita productivity.

Product-wise, the "health series" featuring low-salt and organic options saw revenue surge 27.09% year-on-year, reaching a scale comparable to a medium-sized listed condiment company. Cost improvements also stem from lower raw material prices and internal technology gains. Among main categories, soy sauce revenue reached RMB 8.30 billion, up 4.65%; sauces rose 1.19% to RMB 1.65 billion; and oyster sauce grew 2.56% to RMB 2.57 billion.

The acquisition of Amoy Food, founded in 1908 and a household name in Hong Kong, aligns with the company's Hong Kong listing fundraising plans. Approximately 20% of those proceeds are earmarked for global brand building, channel expansion, and overseas supply chain optimization. During the first half, new subsidiaries were established in South Korea, Singapore, the United States, and Malaysia, while an Indonesian production line has begun mass production of sweet soy sauce tailored to local tastes.

A company spokesperson emphasized: "Going overseas is a long-distance run, not a short-term numbers game. We focus on whether capacity, channels, and products are truly taking root. We do things well first, then talk about them. The market will naturally see the results."