Babi Foods, the Shanghai-listed maker of traditional Chinese steamed buns once dubbed "China's number-one baozi stock," reported revenue growth for 2025 alongside a small decline in net profit, underscoring a tension between steady retail expansion and volatile investment returns.
The company posted operating revenue of RMB 1.859 billion in 2025, up 11.2% year‑on‑year, while net profit attributable to shareholders fell 1.3% to RMB 273 million. Management pointed to nationwide franchise growth, completed acquisitions in Nanjing and Zhejiang and improved supply‑chain and cost controls as drivers of top‑line momentum and operating improvement; adjusted core profit (扣非净利润) rose about 16.5% year‑on‑year.
Yet the headline profit was dented by a RMB 93.82 million drop in fair‑value gains and investment income from the company’s indirect holding in Dongpeng Beverage, a listed soft‑drink group whose secondary‑market share price movements translated into a material swing on Babi’s income statement. That swing turned what would otherwise have been a clearer earnings improvement into a modest decline in reported net profit.
Babi’s history helps explain why the market pays attention. The business went public on the Shanghai main board in October 2020 and has since leaned heavily on a franchise model and targeted regional acquisitions to scale a largely traditional, food‑manufacturing operation. Management highlights show a company focused on product development, lean operations and an expanding franchise footprint — classic levers for consumer staples growth in China's lower‑tier cities.
The investment hit exposes a broader dilemma for many mid‑market Chinese manufacturers: what to do with idle cash. Deploying surplus capital into listed equities can boost short‑term returns but also imports market volatility into corporate earnings. Economists have warned that when such financial activity becomes large relative to a firm's core business, it ceases to be routine asset allocation and becomes a risky business strategy.
For investors the key question is whether Babi’s operational improvements can sustain earnings growth without relying on volatile financial investments. Broker commentary has been mixed but relatively constructive: some houses retain “buy” views on the expectation that 2026 revenue growth will accelerate if franchise roll‑outs and recent acquisitions integrate effectively. Others will focus on governance and capital‑allocation discipline, pressing management to clarify the scale and limits of equity investments.
Strategically, the story is not unique to Babi. It reflects a recurring theme in China's consumption and manufacturing sectors as companies balance slower domestic demand in some segments with an urge to generate returns through financial investments. For Babi, the immediate imperative is to translate franchise expansion and supply‑chain gains into stable, repeatable margins so that a future dip in market prices of financial holdings does not meaningfully unsettle reported profitability.
If Babi can keep growing comparable store sales and contain raw‑material pressures while treating equity stakes as ancillary, investors may reward the company with a higher multiple. If not, earnings may remain lumpy and sentiment fragile, leaving the firm vulnerable to hostile market narratives about reliance on "炒股" — trading stocks rather than strengthening the core business.