Key points of investment
Our opinion: This year is the first year since the liberalization of prevention and control, and the company's sales of hot pot and barbecue products were at a high base during the pandemic, so this year's year-on-year performance was not very impressive. Using this year as the first year, it is expected that the ready-to-eat and ready-to-cook market will continue to expand over the next three years. The company's increased performance is expected to benefit from industry growth. At the same time, the franchise method boosts rapid store opening, but the distribution of single-store revenue is in line with expectations. The company has some untradable shares. If you open up the circulation of its H shares, or increase its liquidity. The company's profitability increased, turning a loss into a profit in '22. It is expected that the trend will continue in '23. Under the PS valuation, the current market value corresponding to '22 PS is 2x.
The ready-to-eat and ready-to-cook market is in a stage of rapid development: looking at the large restaurant market as a whole, it is divided into home and out, and the at-home dining market accounts for 60% (22A). Meanwhile, in a context where consumption levels are graded and residents' willingness to save increases, the home-cooked food market is expected to continue to expand. On the other hand, the average working hours per capita in China are increasing year by year (18A46.8 average weekly working hours; 23Q3 is 48.8 hours). Residents' spare time, especially young people, is shrinking, and the time and desire to spend preparing meals is also shrinking, thus spawning rapid growth in takeout and ready-to-eat markets.
Company franchise+sinking and rapid store expansion: The company mainly earns revenue by selling semi-finished foodstuffs to franchisees downstream stores. By the end of 2022, the number of stores was 9221, and the number of stores doubled in two years, mainly 40-100 square meters of standard stores. The company plans to open 2,500 new stores in 2023, that is, 11,000+ stores by the end of the year. Up to now, it has exceeded 10,000 stores. Looking at January-April, the average single-store revenue of the company's franchised stores during the period was 185,000 yuan. As the number of stores increased and the high demand base during the pandemic returned to normal, single-store revenue declined during the year. From the perspective of a franchisee, the average initial investment in a store is about 300,000 yuan, and the payback period is average.
Risk warning: Food safety, raw material price fluctuations, franchise mechanism management risks, franchise expansion falls short of expectations.