Grape King Bio (1707 TT): A Clearer Path to Earnings Recovery, with Malaysia Emerging as a Second Growth Engine
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
Earnings recovery path becomes clearer, with gross margin improving from 2Q26: Management indicated that 1Q26 likely marked the least favorable earnings mix of the year. From 2Q26, recovery should be supported by a higher contribution from higher margin businesses, increased raw-material shipments, and improving utilization at Grape King Shanghai. Assuming input and packaging costs do not worsen further, consolidated gross margin is expected to recover to around 72% in 2Q26 and remain above that level in 3Q26 and 4Q26. With UVACO entering its peak season and Taiwan contract manufacturing seasonally stronger, 2H26 should outperform the first half.
Taiwan operations sustain growth as ODM/OEM broadens beyond dosage-form expansion: Grape King Taiwan’s 1Q26 revenue rose 20.8% YoY to NT$382mn. Own-brand sales increased 3%, supported by proprietary e-commerce, livestreaming and new-product launches, while ODM/OEM revenue grew 39% to NT$219mn on new softgel and other dosage-form products for a major pharmaceutical customer. However, the customer’s share of contract-manufacturing revenue increased to 56%, while raw-material sales fell to 18% of the mix. Management plans to expand proprietary fermentation ingredients, probiotics and overseas sales, supporting a more diversified and potentially higher-margin growth profile.
Malaysia opens a second membership market, with meaningful profit contribution expected from 2027: UVACO revenue declined 4.2% YoY in 1Q26, reflecting stagnant active membership in Taiwan and the initial reallocation of organizational resources toward Malaysia. The Kuala Lumpur operating center began trial operations on May 29 and will officially open on August 17. By end-May, around 16 training sessions had attracted more than 2,000 participants and several hundred new members. Management is targeting 10,000 members by year-end and breakeven operations in 2026. With recruitment and localization prioritized over near-term profitability, a more meaningful earnings contribution is expected from 2027.
Forecasts and Base Case valuation unchanged; medium-term operating leverage remains underappreciated: The analysts meeting broadly confirmed our existing assumptions. Taiwan ODM/OEM remains strong, additional beverage orders should improve Shanghai utilization, and Malaysia has entered a tangible membership and organizational build-out phase. We therefore maintain our 2026–2027 earnings forecasts. Under our Base Case, we apply 14–16x to average 2026–2027 EPS, implying a value range of NT$137–156. We believe the earnings upside from overseas expansion and the internationalization of the ODM/OEM business is not yet fully captured in the current valuation.
