Main points of investment

Core point of view: the company is a leading enterprise in the region of leisure snacks in Shanghai, with a congenitally dominant position in the East China market, high brand recognition, extensive channel intensive cultivation and wide store coverage, but lacks brand strength and store layout outside the port. To this end, since the beginning of this year, the company has signed a contract to top stream + release fresh snacks strategy + increase brand investment to reshape the brand image, speed up the opening of stores, enhance the same store layout online, in order to make full-channel construction, we believe that the company is firmly advancing in the right direction, the marginal improvement of management is obvious, under the guidance of scale, the company is expected to usher in the performance inflection point and drive into the fast lane of growth.

Company introduction: the first share of the main board snack, the old tree blossoms new. The company is an all-channel operator of snack food with its own brand. It started in Shanghai in 2001, established three direct business areas in Jiangsu, Zhejiang and Shanghai in 2007, landed on the Shanghai Stock Exchange in 2016, put forward the "Wanjia Lighting" plan to the whole country in 2017, and put forward the brand strategy of fresh snacks in 2020 to open the second half of snacks. The founders of the company, Shi Yonglei and Yu Ruifen, are the real controllers of the company, with a combined shareholding of 67.82% and stable control, while implementing the employee stock ownership plan to bind the interests of management and employees. The company's products cover fried goods, meat and other 10 categories, with the Empress Dowager and other 10 items and more than 800 SKU, complete product structure, while continuous development and innovation to meet the needs of consumers.

Industry analysis: the industry has broad space and low market concentration. From the perspective of industry space, the size of China's leisure snack market is trillion, but the per capita consumption of leisure snacks in China is only about 10% of that in Europe and the United States. The improvement of residents' income and consumption upgrading will drive the continuous expansion of the leisure snack market. From the perspective of the competitive pattern, the concentration of China's leisure snack market is low, and the CR3 is less than 25%. Due to the large number of leisure snack categories and strong brands everywhere, no matter in terms of category pattern or regional pattern, they all show the characteristics of high dispersion and separation of heroes, and the leader has a good opportunity for development.

Focus: East China market has significant advantages, brand reshaping + omni-channel construction to open up increments.

1) Brand: the company has a high degree of brand recognition in East China, but there is a lack of foreign counterparts. for this reason, the company first signed a top-tier contract as a spokesman to reshape the brand image and enhance the awareness of young groups; second, it launched the "fresh snack" strategy to create a fresh and high-end image to meet the needs of consumers and get out of homogenized competition; third, increase brand investment, strengthen brand marketing work, and make up the last jigsaw puzzle of the company's growth.

2) Channel: the company has 2800 stores offline, with significant advantages of direct operation, but it is mainly concentrated in East China, and the layout outside the port is relatively inadequate. for this reason, the company first speeds up the opening of stores, carries out the Wanjia Lighting Plan, and goes hand in hand with joining. Among them, Shanghai and Jiangsu are the main direct camps, while other areas have made efforts to join the store layout, and it is expected that hundreds more will be added every year in the future. With the release of the resources of the epidemic stores, the opening of the company is expected to accelerate this year. Second, promote the same store, expand the business boundary of the store through community group shopping and takeout business, and promote the optimization and upgrading of the store at the same time; the third power line, the current products, supply chain, brand and other elements are in place, as the company increases online investment, an online outbreak is just around the corner.

3) products: products are the guarantee for the continuous growth of the company's revenue. on the one hand, the company promotes category innovation and product branding to ensure the smooth progress of the "fresh snack" strategy, and on the other hand, it separates online and offline products to clear up obstacles for power online to meet the needs of consumers in different channels.

Industry comparison: there are significant differences in channel models, and there is room for improvement in scale and profitability. From the performance point of view, the company's income ranks in the middle of the industry, there is little difference in product structure, and there is plenty of room for income expansion. From the point of view of the channel model, Laifen relies heavily on direct operation, based on East China, and quality stores join & with equal emphasis on direct marketing and national layout, Laifen has room for improvement in the joining mode and out-of-port areas. From the perspective of profitability, the direct operation-based model determines the company's "high gross margin, high expenses and low net profit". In the future, the profitability will have room for improvement under the increased share of franchise and scale effect. In terms of operating capacity, the company's turnover level is located in the upper reaches of the industry, and high operational efficiency is one of the company's major advantages.

Investment suggestion: the company has remarkable advantages in East China. In order to enhance its competitiveness in the out-of-port market, the company has actively promoted brand reshaping and omni-channel construction since the beginning of this year, with obvious marginal improvement and is expected to drive into the fast lane of growth. We estimate that the company's revenue from 2020 to 2022 will be 50.52,65.69 and 8.641 billion yuan respectively, an increase of 26.22%, 30.02% and 31.55% over the same period last year, and the net profit will be 0.55,1.41 and 226 million yuan respectively, an increase of 432.75%, 154.99% and 60.32% respectively over the same period last year, and the corresponding EPS is 0.16,0.42,0.67 yuan respectively. The company will continue to be revenue-oriented in the next few years, and the current market capitalization using the PS valuation method is 1.39,1.07,0.81 times the 2020-2022 income, respectively, which is still undervalued relative to our peers. We cover it for the first time and give it a "buy" rating.

Risk tips: upstream raw material price fluctuations, increased market competition, higher store rents.