The company reported a “robust” performance in the fresh sweet potato segment, with earnings nearly doubling thanks to higher sales volume.
According to the analyst, the volume growth was supported by the company’s smart warehouse infrastructure, which helps extends the shelf life of the produce and reduces spoilage, allowing a higher percentage of inventory to be directed into revenue-generating sales channels.
Moving forward, Zixin is bracing for some pressure on its margins no thanks to higher costs such as in fertilisers. Even so, Zixin expects sales volume growth to offset these headwinds, the analysts say.
For the processed products segment, Zixin enjoyed steady growth too with earnings up 12.5% y-o-y. Besides stronger volumes, the growth was helped by a broader product range, notably the additive-free, vacuum-packed steamed sweet potatoes launched in FY2025 alongside the existing sweet potato crisps and fries.
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The processed chips and steamed sweet potato products remain the segment's primary growth engines, with sales surging 71% y-o-y.
For the current FY2027, Lim and Chew expect this segment to grow 30%, driven by improved production of high-margin premium products and an increase in the number of white-label customers for specific products such as sweet potato crisps.
On the other hand, the analysts point out that Zixin’s gross margin dipped by 330 basis points to 31.2% in 2HFY2026, due mainly to higher procurement costs from external farmers as internal production was insufficient to meet demand despite a strong harvest season.
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“In addition, purchases from external farmers are subject to taxes, and the larger procurement volume further intensified the impact of these costs, resulting in margin compression,” state Lim and Chew.
For the current FY2027, they expect Zixin to generate growth from continued strong demand for processed sweet potato products due to increasing number of white label customers in China and international markets.
The company is also shifting towards higher-margin offerings like sweet potato powder, supported by increased production as one of Zixin’s manufacturing facilities which is operating now at 40% capacity, leaving room for further ramp-up.
They expect Zixin to enjoy sustained demand for premium fresh sweet potato varieties such as Hong Yao and Black Gold, supported by high quality and competitive pricing.
Further upside may come from incremental revenue contribution from trading activities in Hainan and continued regional sales in South East Asia and Last but not least, the nascent animal feed segment, which generates revenue from selling sweet potato peeling and other waste materials, is set to see higher volume.
All in, the analysts have raised their FY2027 revenue estimates by 23% and net profit estimates by 29%, leading to a higher target price of 6 cents, from 5.5 cents previously.
Zixin Group shares gained 3.23% to trade at 3.2 cents as at 3.28 pm.
