Industry: The development prospects of snack food are broad, and the concentration of leading enterprises will further increase. 1. The volume and price of the industry have risen sharply, and the scale is growing steadily. According to Euromonitor, the snack food industry reached 602.7 billion yuan in 2018, with a five-year compound growth rate of 8.5%. Among them, the compound annual growth rate of sales was 3.9%, tonnage price was 3.1%, and there was a clear upward trend in volume and price. 2. There is a clear trend in segmentation categories. The popularity of baking and nuts is high. Judging from the volume-price split, the volume and price of bakery products have increased sharply, the price of nuts has increased in strength, and the price of sweets has declined. 3. The competitive landscape is scattered, and the concentration of leading enterprises is constantly increasing. In terms of categories, each segment shows a pattern of dominance, and the concentration of leading companies is increasing year by year. Among them, the concentration of nuts is the highest, the CAR3 market share is close to 60%, followed by the chocolate industry (CR3 is 41% +). In terms of channels, the market share of the top 3 online (three squirrels, baicao flavor, good product stores) is only 22%, and the market share of leading offline companies (Qiaqia Food, Lai Yifen, and Liangpin Stores) also needs to increase their market share. 4. With the upgrading of industry consumption and the increase in the penetration rate of online shopping, it is expected that the revenue growth rate of snack food will remain around 7% in the future. Health categories such as nuts and baking will maintain a high level of prosperity. Leading companies focus on brand building and accelerate online and offline integration, and concentration is expected to increase further. Adjustment: Make internal adjustments and respond positively to external changes. 1. Move from chain stores to omni-channel, comprehensively upgrade the brand image. At present, the company has formed an omnichannel network system with direct-run stores, franchise stores, special channels, e-commerce, and the Laiyifen App Platform, and continues to create a smart retail model. At the same time, innovate brand marketing strategies, comprehensively upgrade brand image, and enhance customer recognition. 2. Strengthen product research and development, and continuously improve innovation capabilities. Currently, the company's products tend to be of high quality and health, and a variety of new products are launched every year, which are well received by the market. 3. Adjust the management team, introduce equity incentives, and activate employee vitality. Highlights: Offline direct management and franchise are going hand in hand, speeding up nationalization, strengthening online and offline linkage, speeding up the integration of upstream and downstream industrial chains, and the release of performance is imminent. 1. Offline direct management and franchise go hand in hand to accelerate nationalization. The company has more than 2,800 stores, of which there are around 2,400 direct-run stores. The competitive advantage of the company's direct business model in the industry is obvious, but the pace of expansion is limited. Starting in 2018, the company has accelerated the development of franchise stores, focusing on developing regions in North China and South China. As brand influence increases, the pace of opening stores is expected to accelerate year by year; at the same time, the company focuses on empowering stores and continuously improving the profitability of individual stores. 2. Strengthen online channels and strengthen online and offline links. In 2019, the company's online revenue is expected to be around 500 million yuan, doubling in size over 4 years; as the company strengthened online marketing, the company's average monthly online sales have grown rapidly since 17-19, second only to three squirrels. 3. Integrating upstream and downstream supply chains, the gross profit level needs to be further improved. The company's product matrix continues to enrich, meet diversified needs, continue to cultivate large products, and continuously upgrade the product structure. The gross margin of the company's products is at the forefront of the industry, mainly due to its sales model and strong ability to control upstream. Profit forecasts and investment advice. As a leading snack chain, the company has strong competitiveness in East China. Currently, the company is moving from region to nationalization, and its market share is expected to increase further. It launched the “Ten Thousand Lights” program in 2018, hoping to achieve the scale of ten thousand stores by 2023. Twenty-one years ago, the company aimed at nationwide expansion, and the income assessment of internal personnel was greater than profit; as the company continued to increase investment and continuously improve the profitability of stores, and direct management combined with the franchise model to achieve rapid expansion, scale effects became apparent, and the net profit level is expected to reach a new level after 21 years. We expect the company's revenue for 19-21 to be 41.9 billion yuan, 56.7 billion yuan, and 7.01 billion yuan, net profit of 0.3 billion yuan, 130 million yuan, 230 million yuan, and EPS 0.08, 0.39, and 0.67 respectively. Compared with listed companies in the industry, Lai Yifen's valuation for 20 years is at a low level. As fundamentals gradually improve, it is expected to enjoy a valuation premium. We gave PE 40 times in 2020, and the corresponding target price was 15.6 yuan. We covered it for the first time, and gave it a “recommended” rating. Risk warning: Direct store rent and labor costs have risen sharply, franchise progress has fallen short of expectations, online growth has slowed, raw material prices have risen, and food safety issues have been raised.