Matters:

Since this year, the company has been actively adapting to changes in cost-effective consumption trends and developing new hard discount business formats such as mass-selling snacks and discount community supermarkets. It is expected to bring new impetus to the long-term development of the company's business. According to public reports, the company currently has close to 50 stores selling the snack brand “Yue Ji Good Snacks”, and the hard discount community supermarket “Haohuixing” has opened about 4 stores.

Guoxin Retail's view: New business layout for hard discounts for companies. We believe that the essence of the hard discount business format is to achieve higher turnover and scale at the terminal to achieve cost effectiveness through extreme product selection and reduced supply chains, and to reduce costs to serve mass consumers. However, after years of operation, Jiajiayue initially possesses key operational capabilities to develop discount retail in five areas, including a global direct procurement network; strong fresh food processing and production capacity; warehousing and logistics network construction; and a digital traceability system. In the future, with the further implementation of the company's store model, it is expected to become a new growth curve for the company through active large-scale expansion.

Overall, since this year, the company's traditional business has achieved a steady recovery in offline store traffic, and online channel construction has been improved to seize home business opportunities. Furthermore, as operations outside Shandong Province gradually mature and profitability improves, performance elasticity is expected to gradually be unleashed. At the same time, the company will also continue to consolidate its supply chain construction capabilities and strengthen core barriers in the ever-changing retail industry competition. On this basis, the company actively responds to changes in consumer demand and actively develops snack mass sales and discount community supermarket business, which is expected to further open up medium- to long-term growth space. We maintain the company's 2023-2025 net profit forecast of 279/3.61/402 million yuan, corresponding to PE 30.8/23.8/21.4 times, respectively, and maintain the “buy” rating.

Risk warning

The layout of the new business format fell short of expectations; the macroeconomic downturn affected residents' purchasing power; and traditional supermarket business operations were affected by diversion.