We have been deeply involved in the industry for more than 20 years, becoming a leader in the spicy strip industry. Founded in 1999, Weilong has products such as large and small gluten, spicy sticks, grilled meat, konjac flavor, seaweed, soybean skin, 78° marinated eggs, overbearing panda spicy strips, little witch konjac, etc., forming a three-series product matrix of seasoned noodles, vegetable products, soy products and other products. Through unique product taste and continuous brand marketing, the company has become a national spicy snack brand. In 2021, the company's market share in the spicy snack food market reached 6.2%, ranking first.
The development of the industry is continuously regulated, and Weilong's leading position is stable. In 2001, spicy strips were founded in Pingjiang, Hunan. Due to the influx of a large number of enterprises with a low entry threshold, production chaos has been reported many times since then, and industry development has been continuously standardized. In 2022, the first spicy strip industry standard formulated with Weilong's participation was introduced, and the spicy strip industry is developing in the direction of standardization, safety and health. Spicy flavor has a long history in Chinese eating habits. The market size of spicy snack food was 172.9 billion yuan in 2021, expected to reach 273.7 billion yuan in 2026, and the CAGR for 2021-2026 is 9.6%. Looking at segmented industries, seasoned noodle products are on a large scale, with 45.5 billion yuan in '21, and spicy casual vegetable products at 26.5 billion yuan. It is expected to reach 58.7 billion yuan in 2026, and the CAGR for 2021-2026 is 17.20%. As the industry leader, Weilong is far ahead in market share. In 2021, its market share in the spicy snack food market was 6.20%, far ahead of 1.60% in second place, and its market share in seasoned noodle products was 14.30%, ahead of 2.40% in second place. As the industry develops and continues to be regulated, Weilong is expected to become a leader and a strong player.
Differentiated online marketing has become a hot topic, and systematic marketing has expanded the younger customer base. Weilong has strongly allayed consumers' concerns about spicy “junk food” through live broadcasts from the factory and collaborated with CCTV to visit the factory, and strengthened Weilong's perception of “safety and hygiene.” Furthermore, through differentiated marketing, the company creates traffic, effectively brings consumers closer, and helps increase consumers' awareness and stickiness to the brand. Weilong has formed a rich and complete marketing matrix, which has achieved full-platform e-commerce channel coverage, which helps to increase brand awareness and expand the younger customer base. As of 2023H1, the number of self-media fans on all platforms reached 3.8 million, achieved 1 billion exposures, achieved 1 billion exposures, 660 million reads/broadcasts, and 19 million interactions.
Spicy bars have a significant market share advantage, and horizontal expansion has created a new growth curve. On September 6, 2023, the spicy spicy strip overdominates the listing of panda. The company regards spicy spicy bars as one of the new growth poles for spicy bars, and is expected to seize a certain market share with the Weilong brand effect and strong dealer system. In terms of vegetable products, the company is the pioneer of konjac flavor and has a first-mover advantage. Currently, it is far ahead in terms of volume of over 1 billion dollars. The launch of the new konjac product, The Little Witch with the Belly of Konjac, is expected to replicate the successful experience of konjac flavor. Sales volume declined after the company's price increase in 2022. Currently, the price transmission is relatively smooth, and the adverse effects may gradually subside.
Offline channel reforms continue to deepen, and new channels such as mass selling snacks and e-commerce are being actively embraced. High-tier marketing+low-tier marketing has achieved positive results. As of 2023H1, 32 sales offices, 334 ancillary sales agents, and 120 ancillary sales distributors have been set up, and the number of outlets covered by terminals continues to increase. In terms of mass snack sales systems, active support began in May 2023. By the end of June, Weilong had reached cooperation with 62 well-known snack systems, covering more than 10,000 key snack stores, and maintained a month-on-month increase since July, August, and September. The company is paying more attention to e-commerce business development and using it as an important position for brand marketing. In terms of overseas markets, the company established an overseas business development center in 2023. 2023H1 increased 78.94% year on year to 45 million yuan, maintaining a high performance growth rate.
Prices of raw materials are expected to decline, and improvements in profitability can be expected. The company's main raw materials are soybean oil, flour and konjac, and the price of raw materials accounts for nearly half of the operating costs. Currently, the prices of soybean oil and flour are still high compared to 2020 and '21. As the relationship between supply and demand eases, prices are expected to decline, and profitability is expected to improve.
Investment suggestions: We expect the company's revenue for 2023-2025 to be 49.85/57.57/6.627 billion yuan, respectively, up 7.17%/15.50%/15.10% year-on-year respectively. We expect the company to achieve net profit of 9.81/11.58/1,364 billion yuan in 2023-2025, an increase of 548.68%/17.99%/17.78%, respectively. The corresponding PE for 23-25 is 16.7/14.2/12.0X, giving it a “recommended” rating.
Risk warning: New product performance falls short of expectations; channel expansion falls short of expectations; risk of rising raw material prices, etc.