Core points:
The company was founded in 2005 in Changsha City, Hunan Province. After initial development in 2005-2008, rapid opening of stores in 2008 to 2017, and strategic layout of the relevant food industry since 2017, the company has become a leader in the domestic casual halo products industry.
Industry: The concentration of scale growth is low, and differentiated flavors are consumer stickiness. Looking at the supply side, the leisure halogen products industry grew sharply from 23.2 billion yuan in 2010 to 129.9 billion yuan in 2020. The 10-year CAGR reached 18.8%, but CR5 was only 20.2%, and there is plenty of room for concentration to increase. Looking at the demand side, the differentiation of marinades and production processes has led to products having unique flavors. Consumers have unique memories. Casual marinated products are generally spicy and have addictive properties, and “capsaicin pleasure” increases the consumer repurchase rate.
Business model: The single-store model for halogenated products is excellent, and high efficiency drives high growth in store expansion. Ping Xiao is the winning core of the competition to join the chain business. Halogen products have high efficiency in a single store; the efficiency of a single store with excellent taste and splendor is 40,000 to 80,000 yuan/square meter, and Zhou Heiya can reach 70,000 yuan/square meter.
Compared to other chain business formats, Absolute Franchise stores require the least initial investment amount, which is only 100,000 to 200,000 yuan, and it takes 12-18 months to pay back. The excellent single-store model makes franchisees more willing.
Direct management vs. franchise itself has no advantages or disadvantages; the development stage determines the applicable model.
The direct management model is difficult to adapt to overscale threshold operations, and the management radius limits the expansion limit. In contrast, the franchise model transfers a large part of the workload to franchisees, and the company's management limit is higher. Compared to well-known catering companies, brand awareness of halogenated products needs to be raised. Joining is the best option at this stage, and can make the most of the franchisee's local information and networking advantages.
The supply chain and the addition committee build barriers. The company has established 21 production bases across the country. The production capacity layout covers sales outlets across the country, and fresh goods are sold now to ensure product quality. The addition committee built a communication platform, strengthened communication, support and store inspection efficiency between the company and franchisees, and increased the enthusiasm and cohesion of franchisees.
Endogenous store opening+extension layout Food Ecology-Driven Company will become a leading company in the halogenated products industry in the future. (1) Store space: Old neighborhoods in Tier 1 and 2 cities are being renovated and cities are expanding. Emerging complexes and communities have brought new store demand. In the future, companies will still have crypto space in Tier 1 and 2, and there is a large number of stores for wives of couples in third- and fourth-tier cities that can be replaced. According to the calculation results, the maximum opening limit for Perfect Food is 21,000 to 24,000, and there is still room for 14,000 stores now. (2) Food ecosystem layout: The company has invested in more than 70 companies, including supply chain, cold chain management, catering management and consulting, chain catering and condiment companies. Actively lay out a food ecosystem with “main business, brine chain, light catering - supply chain collaboration - expanding upstream and downstream of the industry chain”, so that the company's catering can obtain “one-stop service” from supply chain, cold chain distribution, sales channels (ordering agents, etc.), catering equipment to brand incubation, while also investing in condiments, cooking oil and prepared dish processing to continuously develop the upstream and downstream of the industry chain to reduce operating costs and improve the catering industry.
Profit forecasts and investment suggestions: The company is expected to achieve revenue of 66.09, 80.29, and 9.656 billion yuan in 2021-2023, up 25%, 21%, 20% year on year; to achieve net profit of 10.98, 12.33, and 1,539 billion yuan, up 57%, 12%, 25% year on year; corresponding EPS is 1.80, 2.03, 2.53 yuan/share, corresponding to PE in 2021-2023, 33X, 29X, 23X, maintaining the “buy” rating.
Risk warning: Risks such as fluctuations in raw material prices, food quality control, worsening of the epidemic, and increased competition.