Dongwu Securities: First coverage of Zhongxing Microbial Industry with a Buy rating

Soochow Securities Co., Ltd. analysts Su Cheng and Li Yinqi recently conducted research on Zhongxing Edible Fungus and released a research report titled “The Performance Inflection Point Is Here, and We Will Push Ahead on a New Cordyceps Flower Journey,” giving Zhongxing Edible Fungus an “Buy” rating for its first coverage.

Zhongxing Edible Fungus (002772)

Investment Highlights

A leading domestic factory-based edible mushroom company; 2025 performance hits the bottom and rebounds. The company was founded in 2005 and went public in 2015. Its actual controllers, Tao Jun and Tian De, collectively hold 35.93% of the shares. Twelve production bases cover the country’s five major regions, staying close to raw material production areas and consumer markets. Revenue has long remained steady. In 2023, button mushrooms became the company’s largest product. The product structure and regional layout have been optimized in parallel, with East China and Southwest China as the core growth regions. In recent years, profits were impaired due to the slump in enoki mushroom prices. In 2025, performance improved significantly. The improvement at the core is attributable to stable profitability from button mushrooms, a rebound in enoki mushroom prices, and continuously optimized expense ratios.

The edible mushroom industry’s pattern continues to improve, with factory-based adoption rising and greater concentration among leading players. High value-added varieties have become a new growth driver. In recent years, national policies have elevated edible mushrooms to the strategic height of national food safety, and full-chain support policies provide a favorable external environment for the company’s efforts in seed industry revitalization and standardized production. In 2024, the industry’s output value exceeded 420 billion yuan, and factory-based output grew rapidly. Among companies with daily factory-based edible mushroom production volumes exceeding 100 tons nationwide, the company ranks No. 2; its core pillar, button mushroom business, has daily capacity of 450–500 tons, accounting for 40% of domestic factory-based output. In addition, its gross margin remains stable at over 34%, giving it strong industry leadership. In response to earlier overcapacity in the enoki mushroom market, as a leading enterprise the company proactively reduced capacity and carried out technical upgrades. By compressing capacity, it drove the price bottom to rebound starting in the second half of 2025. The mass production scale of northern cordyceps has been expanding rapidly. Breakthroughs in artificial cultivation of winter (cordyceps) flower cordyceps and reductions in cost have made it a new high–gross margin track. Combined with policy support such as the “big food” concept and high-quality industrial development, the edible mushroom industry is shifting from scale expansion to quality upgrading. High value-added varieties and factory-based leading players continue to benefit.

Built-in core competitive barriers through nationwide layout, a multi-variety strategy, and technology R&D. The company leverages the scale effect from its nationwide layout to achieve cost reduction and efficiency gains. On the cost side, raw materials are sourced nearby and sold nearby across regional bases, and combined with large-scale production, it effectively spreads raw material, logistics, and fixed costs, forming a clear cost advantage. Through large-scale production, the company’s overall expense ratio has fallen from 19.55% in 2018 to 13.99% in 2025. In terms of technological innovation, in 2024 the company’s R&D investment ranked among the top in the industry. It successfully cultivated self-developed varieties such as “Zhongfu No. 1,” and is gradually moving away from dependence on foreign mushroom strains. More forward-looking is that the company is fully focused on seizing opportunities in the rare edible mushroom highland. It is prioritizing factory-based bio-mimetic cultivation projects for winter (cordyceps) flower cordyceps in Gansu and Sichuan. The cost of artificial cordyceps is far lower than the price of wild products, and its net profit margin is relatively high. With deep technical accumulation and breakthroughs in high–gross margin varieties, Zhongxing Edible Fungus is transforming from a traditional producer into a modern bio-agriculture leader with the ability to capture premium value across the full industrial chain.

Profit Forecasts and Investment Rating: At present, the company’s profitability in the enoki mushroom category is continuously recovering, and its button mushroom products’ growth remains steady. The new category, winter (cordyceps) flower cordyceps (ecological propagation), has started production smoothly. We expect the company’s revenue for 2026–2028 to be 2.31/2.51/2.69 billion yuan respectively, representing year-on-year growth of 9.9%/8.8%/7.4%. Attributable net profit to shareholders for 2026–2028 is expected to be 0.38/0.43/0.48 billion yuan respectively, representing year-on-year growth of 13.0%/13.0%/11.8%. The corresponding P/E ratios are 16/14/13X. First coverage: given a “Buy” rating.

Risk Warning: The progress of winter (cordyceps) flower cordyceps production ramp-up is less than expected; industry competition risk; downstream demand is less than expected.

The latest profit forecast details are as follows:

Within the last 90 days, 1 institution has issued a rating for this stock, including 1 Buy rating.

The above content has been compiled by Securities Star based on publicly available information and generated by an AI algorithm (Internet Info Security Record No. 310104345710301240019), and does not constitute an investment recommendation.