A product of good conscience, a leader in high-end snacks

Liangpin Store originated in the hinterland of central China. Over the past 10 years, it has continued to consolidate its leading position in the domestic high-end snack industry through store development, e-commerce sales positioning, and testing the waters. In terms of products, the company has a rich product matrix and the ability to create explosive products. At the end of September '22, the total number of omni-channel SKUs was 1,655, including meat snacks, seafood snacks, vegetarian mountain food, dried plum fruit, etc., and in the 603 new products, the company created 17 tens of millions of explosive products; in the channel part, the company adopted an omni-channel sales model, which fully integrates various sales networks such as offline stores, e-commerce, group buying, etc., and has a leading edge in the same industry; in the store section, as of the end of September, the company had 3,344 offline stores. There is room for expansion, At the same time, the company is actively adapting to the development of the industry and launched “Snack Tenjiya” to enter the snack mass sales business, which is expected to open up new channels for growth. At the performance level, in 2023 Q1-3, the company achieved cumulative operating income of 5.999 billion yuan, a year-on-year decrease of 14.33%; net profit to mother was 191 million yuan, a year-on-year decrease of 33.43%.

Comprehensive strategies to meet diversified needs

All category+multi-brand+omni-channel, covering diversified snack needs. The company has long been adhering to the idea of development and operation of all categories, adhering to customer needs as the guide. The products produced cover 18 varieties of daily snacks. The company reduced the prices of more than 300 products in November, with an average price reduction of 22% and a maximum drop of 45%. We believe this will help the company to implement a differentiated product strategy based on all categories: on the one hand, cover a wider customer base through low-premium products to meet the needs of the general customer base for good quality and low prices; on the other hand, rely on clearly differentiated high-quality image products to occupy the customer's mentality of “high-end snacks”. In addition, the company has the only omnichannel sales network with a balanced and highly integrated online and offline structure in the casual snack industry. The store no longer performs traditional business functions, but has become a service center, delivery center and experience center under an omnichannel system, which greatly enhances and enriches the shopping experience and consumer ecology of C-end users, and can more effectively meet the diverse snack food needs of different consumer groups in different scenarios.

Offline stores are expected to continue to contribute to growth. The company continues to expand and develop the offline store business. By the end of September '23, there were 3,344 direct-run and franchise stores nationwide, accounting for 39% and 61% respectively. In terms of the regional structure, the number of stores is still mainly in central China. The latest number of stores reached 1,550, accounting for more than 46%, but this ratio has dropped close to 9% from 55% in 2019. In terms of the CAGR for the number of stores (calculated over 4 years), it is 4% in central China and 13% in non-central China regions. We believe that the strategic layout of the company's nationalized stores is still in the aggressive stage. In particular, the coverage of North China and Northwest China is far from sufficient, so it is expected that there will still be plenty of room for growth outside of central China in the future.

Investment advice: first coverage, giving a “buy” rating

Revenue for 2023-2025 is expected to be 89.60 billion yuan, 101.04 billion yuan, and 11.015 billion yuan respectively. The corresponding growth rates are -5.1%, 12.8%, and 9.0%, respectively, and net profit to mother is 2.91, 3.78, and 471 million yuan, respectively. The corresponding growth rates are -13.3%, 29.9%, and 24.8%, respectively. First coverage, giving a “buy” rating.

Risk warning

Online business growth is slowing down, offline store expansion falls short of expectations, and food safety issues.