Analysis Report on Gross Profit Margin and Cost Structure Optimization of Yuanji Food

Based on the collected information, I now present to you an in-depth analysis report on the gross profit margin and cost structure of Yuanji Food.

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Yuanji Food Group Co., Ltd. officially submitted its listing application to the Hong Kong Stock Exchange on January 12, 2026, seeking to list on the Main Board [1]. It owns two major brands, “Yuanji Wonton” (contributing 97% of revenue) and “Yuanji Weixiang”. As of September 30, 2025, the company operates 4,266 stores, with franchise stores accounting for over 95% of the total, making it the largest Chinese fast-food enterprise in China and globally [2].

According to the prospectus data, Yuanji Food’s gross profit margin shows the following trends:

Period	Gross Profit Margin	Operating Revenue	Adjusted Net Profit	Net Profit Margin
2023 Full Year	25.9%	RMB 2,026 million	RMB 179 million	8.8%
2024 Full Year	23.0%	RMB 2,561 million	RMB 180 million	7.0%
First Three Quarters of 2025	24.7%	RMB 1,982 million	RMB 192 million	9.7%

Notably, the gross profit margin in 2024 decreased by approximately 2.97 percentage points compared to 2023, which is mainly related to fluctuations in raw material costs, supply chain pressure brought by store expansion, and promotional measures after the “food safety crisis” (such as offering a 20% discount on materials to franchisees) [3].

Yuanji Food’s cost structure mainly consists of the following parts:

• Dubbed a “supply chain company in catering clothing”, Yuanji Food’s core business model is to supply raw materials such as fillings and dough sheets to franchisees through 5 self-owned factories and 24 warehouses [4]
• Its main raw materials include bulk agricultural products such as pork (the highest proportion), flour, and vegetables
• Fluctuations in raw material prices have a significant impact on the company’s gross profit margin, and the periodic changes in pork prices are the main risk factor

• Factory automated production costs
• Cold chain warehousing and logistics distribution costs
• Packaging material costs

• Sales and marketing expenses surged to RMB 125 million in 2024, a year-on-year increase of 63.6%
• which was mainly used for brand promotion, franchisee support, and remediation measures after the food safety incident [3]

According to industry research data, the typical cost structure of catering enterprises is as follows [5]:

Cost Item	Catering Industry Average	Yuanji Food’s Situation
Raw Material Cost	35-40%	Approximately 65-70%
Labor Cost	15-20%	Borne by franchisees
Rent Cost	10-12%	Borne by franchisees
Other Expenses	20%	Approximately 10-15%

Compared with peers, Yuanji Food’s gross profit margin of 23-26% is significantly lower than that of:

• Chinese formal dining chains Xiaocai Garden and Green Tea Group: over 60%
• “First Chinese Noodle Chain” Meet Xiao Mian: approximately 60%
• Yum China: 17.1%
• Dashi Holdings (Domino’s China): approximately 45% [6]

Such a low gross profit margin makes Yuanji Food’s profit model vulnerable to rising raw material costs and the impact of unexpected events.

The 22.8% gross profit margin mentioned by the user may correspond to the following situations:

1. Performance in a Specific Quarter
   : Affected by the food safety incident, the gross profit margin may have dropped to this level in the fourth quarter of 2024
2. Specific Product Line
   : The gross profit margin level of certain promotional products or during the new product promotion period
3. Peak Period of Raw Material Costs
   : The gross profit margin when prices of raw materials such as pork are at a high level

According to the prospectus data, the full-year gross profit margin in 2024 was 23%, which is close to 22.8%, indicating that raw material cost pressure and promotional measures had a significant impact on the gross profit margin in 2024 [3].

• Establish a strategic procurement system, sign long-term agreements with large suppliers such as COFCO, Wen’s Group, and Muyuan Foods to mitigate price fluctuation risks [7]
• Promote centralized procurement mode to reduce raw material procurement costs through scale effects
• Establish a raw material price monitoring and hedging mechanism to hedge against bulk commodity price fluctuations

• Improve factory automation level to reduce unit production costs
• Optimize production processes to reduce food material waste
• Implement lean production to continuously improve production efficiency

• Continue to optimize the national warehouse network layout to improve distribution efficiency
• The inventory turnover days were 12.1 days in 2024, which is lower than the industry average of 25 days [2], and there is still room for improvement
• Promote the construction of intelligent warehousing systems to reduce warehousing costs

• Optimize product portfolio to increase the sales proportion of high-margin products (such as the signature shrimp and crab roe wonton)
• Develop differentiated new products to enhance product premium capacity
• Appropriately increase the selling price of terminal products to improve gross profit margin

• Optimize SKU structure, streamline low-efficiency products to reduce management complexity
• Implement standardized recipes to reduce food material waste
• Introduce nutritionists to optimize filling ratios to reduce raw material costs while ensuring taste

• Avoid zero-sum games between franchisees and maintain the profitability of individual stores
• Optimize store location strategy to improve revenue efficiency of individual stores
• Data shows that the revenue capacity of individual stores decreased by approximately 4.3% year-on-year in the first three quarters of 2025 [3], which requires focused improvement

• Continue to expand the layout in third-tier and lower-tier cities, with the proportion increasing from 19.8% in 2023 to 26.6% in 2025 [2]
• Rents and labor costs in sinking markets are relatively low, which is conducive to improving overall profit margins
• The Yuan Xiaojiao brand (store opening budget of RMB 110,000 vs. RMB 266,000 for Yuanji Wonton) can serve as supplementary coverage [1]

• Promote digital management of the supply chain to achieve full-process traceability
• Establish an intelligent replenishment system to reduce inventory costs
• Introduce AI technology to optimize production scheduling and logistics distribution

• Strengthen the franchisee training system to improve store operational efficiency
• Establish a franchisee performance evaluation and incentive mechanism
• Improve franchisee management efficiency through digital tools

1. Risk of Raw Material Price Fluctuations
   : Fluctuations in prices of bulk commodities such as pork and flour will directly affect the gross profit margin
2. Food Safety Risk
   : Challenges in food safety management under the franchise model still exist
3. Risk of Slowdown in Store Expansion
   : The net number of new stores decreased from 1,151 in 2023 to 812 in 2024, and then to 313 in the first three quarters of 2025 [3]
4. Risk of Intensified Competition
   : Competition from prepared food brands, other wonton and dumpling chains, and cross-category fast food

Yuanji Food’s 22.8% gross profit margin is in the lower-middle range of the industry, which is consistent with its “small profit but quick turnover” business model. The core of optimizing the cost structure lies in three directions:

. Considering that the company is promoting its listing on the Hong Kong Stock Exchange, it is recommended to focus on key indicators such as raw material price management, maintenance of franchisee profitability, and improvement of individual store operational efficiency.

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[1] Time Finance - “Hunan PE Student Sells Dumplings to Seek IPO, 4,266 Stores Generate Over RMB 2.5 Billion Annual Revenue, and Recruits a Senior Executive from Oriental Select” (https://cn.investing.com/news/stock-market-news/article-3164243)

[2] Sina Hong Kong Stocks - “Analyzing Yuanji Food’s Prospectus: Over 4,000 Stores Launches IPO Bid” (https://finance.sina.com.cn/roll/2026-01-12/doc-inhhaeyi8218016.shtml)

[3] Huxiu App - “IPO Report Card After the ‘Food Safety Crisis’: Yuanji Wonton’s Growth ‘Stalls’, Ready to Tell a New Story in Overseas Markets?” (https://www.huxiu.com/article/4826205.html)

[4] Shenzhen News Network - “Yuanji Wonton Submits Listing Application to Hong Kong: The ‘Handmade’ Logic and Capital Advancement of a Chinese Fast-food Giant” (https://www.sznews.com/news/content/2026-01-15/content_31904827.htm)

[5] Dongfang Fortune Securities Research Institute - “Special Research on the Food and Beverage Industry: Product Upgrading, Channel Fission, and the Reopening of High-quality Tracks” (https://zhongzhihui.oss-cn-beijing.aliyuncs.com/industryPdf/20230928-东方财富证券-食品饮料行业专题研究)

[6] Yahoo Finance (Hong Kong) - “Market Focuses on Tech Over Consumption: Is Yuanji Wonton’s IPO Timing Unfavorable?” (https://hk.finance.yahoo.com/news/市場重科技輕消費袁記雲餃上不逢時-055155899.html)

[7] Toubao Research Institute - “The Freshly Made Wonton and Dumpling Industry Emerges, with Community Stores Gaining Momentum” (https://pdf.dfcfw.com/pdf/H3_AP202405171633719988_1.pdf)