Grape King Bio (1707 TT): Margin Recovery Underway, International Growth Engines Continue to Build
Company Overview
Founded in 1969, Grape King Bio (1707.TW) is a leading Taiwan health-supplement company built on vertically integrated fermentation, branded products, and a fast-growing OEM/ODM platform. Its four business units—Taiwan own-brand, OEM/ODM, UVACO, and Shangh1ai—are supported by in-house R&D and decades of fermentation expertise. With a portfolio grounded in functional mushrooms, probiotics, and clinically supported actives, the company serves both domestic consumers and global brands. Backed by a solid balance sheet and steady cash flow, Grape King is focused on product innovation and international expansion to support long-term growth.
Key Points
2Q26E margin recovery points to improving earnings quality: We forecast 2Q26 revenue of NT$2.41bn, down 6.0% YoY, with EPS of NT$1.56, down 14% YoY but up 32% QoQ. More importantly, gross margin is expected to rebound to 73.5% from 69.7% in 1Q26, while operating margin should recover to 18.0%. Although higher raw-material and packaging costs remain a headwind, we believe the 1Q profitability trough has passed. With a more favorable business mix and part of the annual incentive-related expenses already recognized in 1H, earnings should continue to improve into 2H26.
2026–27E forecasts revised; 2028E highlights a stronger medium-term growth profile: We cut our 2026–27E revenue forecasts by approximately 5–9% to NT$10.40bn and NT$11.41bn, respectively, and lower EPS by 11–16% to NT$7.83 and NT$9.00, mainly reflecting weaker-than-expected UVACO Taiwan performance. We also introduce 2028E estimates, with revenue of NT$13.16bn, up 15.3% YoY, and EPS of NT$10.9, up 21.1% YoY. Our assumptions incorporate continued OEM/ODM expansion, improving capacity flexibility, further build-out of Malaysia, a gradual recovery in Taiwan consumption, and incremental contributions from new products.
UVACO Taiwan remains in adjustment, while Malaysia builds early operating momentum: UVACO Taiwan continues to face softer demand, with new-member additions down approximately 20–30% YoY, reflecting cautious consumer spending, more difficult member recruitment, and organizational resources being redirected to support Malaysia. Malaysia, however, is showing encouraging early progress. By end-July, UVACO had conducted 42 training sessions with more than 3,000 cumulative participants and recruited nearly 1,000 members despite having only six products approved for sale. We believe the next phase will be defined less by headline recruitment and more by member activity, product expansion, and spending contribution.
OEM/ODM remains a key growth pillar; longer-term upside is not fully reflected in valuation: OEM/ODM revenue grew 18.4% YoY in 1H26, while its first major Asian industry exhibition generated engagement with approximately 253 prospective customer groups from 13 countries. Although conversion cycles have lengthened due to softer global demand, tariffs, supply-chain adjustments and ongoing production-line upgrades, customer and product pipelines continue to expand. We believe the current valuation more fully reflects near-term UVACO Taiwan weakness than Grape King’s longer-term international growth potential.