The company is mainly directly managed, the layout of franchise stores has been accelerated, and the gross margin of each channel has been rising steadily. The company is an omni-channel operator of snack food with its own brands. The products mainly cover 10 core categories such as roasted nuts, meat snacks, pastries and cookies, etc., with more than 800 products. The company mainly opened stores directly, accounting for 76% of direct sales revenue in 2020. In 2021, the company accelerated the expansion of franchise stores, and the share of franchise business increased rapidly. Due to the high gross margin of direct-managed stores, as the share of franchises and other channels increased, the company's gross margin declined reasonably, but the gross margin of each channel increased steadily.
Snack foods still have a high room for growth and growth rate. In 2015-2020, the 5-year CAGR for casual snacks in China was 12%, but per capita consumption was less than half that of Japan, about 1/6 of the US. Similar to Japan, the scale of snack food in China is expected to maintain a high growth rate over the next 30 years. Among them, casual halide products, baked goods, and roasted nuts are growing rapidly, and leading companies have advantages in raw material sources, R&D, channels, etc. As snack consumption's requirements for product quality and diversity increase, the market share of the industry is expected to be further concentrated on leading companies. A-share snack food listed companies are all focusing on high-growth tracks such as roasted nuts.
The company is actively adapting to the development trend of the industry and is waiting for breakthroughs in a multi-pronged manner:
The company focuses on developing franchise business. Expanding stores through franchise is conducive to gaining advantages, adapting to local development, and speeding up store expansion. The company is rapidly developing franchise business. In the second half of the year, it will accelerate the opening of stores. It is expected that about 600 new affiliate stores will be added this year. Assuming that the company opened 800 new franchise stores in 2022, the revenue of a single store was 80% of Suzhou's revenue level, and the gross margin of the company's franchise wholesale dropped to 15%, it is estimated that the 800 new franchise stores could bring the company 506 million yuan in revenue and 75.84 million yuan in gross profit.
Raise the revenue level of a single store in various ways: (1) Focus on regions with strong consumption capacity and vigorously develop franchise business in Jiangsu and Guangdong. Over the past few years, Yifen's performance has been poor. We think this is mainly due to the gradual saturation of opening stores in Shanghai, the efficiency of opening stores outside of Shanghai, and the low revenue of individual stores. In the future, Laiyifen will focus on relatively developed regions such as Jiangsu and Guangdong, and the average revenue per store is expected to increase.
(2) Community drainage to increase single-store revenue. Currently, the company mainly promotes community group business through directly managed stores in Shanghai. Since then, the Yifen app has been the main traffic entry point, exploring interaction with customers through the corporate WeChat community, and finally channeling customers to offline direct-run store pickup points. We believe community group buying can drive traffic to stores, increase the repurchase rate, and raise the revenue level of a single store.
(3) There is room for improvement in the single-store model. The efficiency of the Laiyifen directly-managed store is comparable to that of the Liangpin store, but the area of the Laiyifen store is small, so the revenue per store is lower. If the area of the single store can be increased appropriately, although it will have a slight impact on the ping efficiency, the revenue and profit of the single store is expected to increase.
Profit forecast and suggestions: The company's revenue for 2021-2023 is estimated to be 42.41/50.05/5.463 billion yuan, respectively, up 5.33%/18.01%/9.16%, respectively; net profit for returning mother is 0.24/0.27/71 million yuan, up 136.76%/13.02%/163.23%, the corresponding PE for 2021-2023 is 173/153/58 times, and the corresponding PEG is 1.26/11.74/0.36, respectively. Covered for the first time, giving a “recommendation”
ratings.
Risk warning: The development of the company's group buying business and franchise business fell short of expectations; sales expenses fell short of expectations; in the post-pandemic cycle, overall consumption levels declined; product quality risks.
