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Investing.com - Goldman Sachs downgraded Gambol Pet Group Co (301498:CH) from Buy to Neutral and slashed its price target to RMB75.00 from RMB120.00, implying approximately 12% downside potential.
The downgrade follows Gambol’s third-quarter 2025 net profit miss, with the company reporting sales of RMB1.52 billion (up 21.8% year-over-year) and net profit of RMB135 million (down 16.6% year-over-year). While sales exceeded expectations with domestic growth of approximately 40%, overseas sales declined.
Goldman Sachs cited higher-than-expected selling expenses at 23.3% of revenue as the primary reason for the profit shortfall, likely due to intensified competition. This led to an overall SG&A expense ratio of 31.5% and a domestic net profit margin decline of 4 percentage points to 8%.
The investment bank reduced its 2025-2027 earnings forecasts by 14-30% and now expects continued margin pressure into the fourth quarter, particularly with the upcoming Double 11 shopping festival and lower visibility into the company’s 2026 competition strategy.
Goldman Sachs maintained its domestic sales compound annual growth rate forecast at 30% for 2025-2027 but lowered its overseas sales CAGR projection to 4% from 6% previously, while reducing its domestic net profit growth outlook from 52% to 36% over the two-year period.
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