Maintain an increase in holdings. Considering the relative pressure on the external environment, there was some disturbance in the expansion of stores and the upfront investment due to store turnover and upgrades, the forecast for the company's adjusted net profit for 2023-25 was lowered to RMB 3.63/394/46 million yuan (originally $427/532/654 million yuan), a growth rate of 7.2/8.6/16.9%, maintaining the target price of HK$9.11 to maintain growth.
Golden Decade Strategy Conference: High-quality fruit experts and leaders, four major opportunities to drive 100 billion dollars in sales.
1) The company held a 10-year golden strategy conference on January 5. The “tasty” strategy was upgraded to a “high quality fruit expert and leader”, and strived to become the world's leading ecological fruit technology company in 2032, achieving a sales scale of 100 billion dollars, and eventually becoming the world's leading agricultural ecological technology platform company; 2) Behind the strategic upgrade: According to Frost & Sullivan and Junzhi data, the domestic fruit retail market is expected to be 1.78 trillion yuan in 2026, with a CAGR of about 8.3% exceeding the growth rate of popular fruit by 5.1%; Fruit quality/differentiation still has a lot of room for development; 3) Focusing on strategic upgrading, the company has set up three major business groups and overseas committees to focus on developing retail, ToB, and category businesses.
Three strategies will be launched in 2024: store renewal, signature fruit, and gift markets. 1) Released a new sixth-generation store image, and some stores are already in place, and the plan is to fully renew 6000 stores within 3 months; we believe that the brand ambassadors will promote store expansion and customer flow/store efficiency; 2) Continue to promote variety introduction, soil improvement, and agricultural management. Currently, 35 exclusive fruit brands have been formed. In the future, it will focus on promoting signature fruit+ to 100 models. In the long run, it is expected that its sales share will increase from the current 13% to about 40%, which will enhance customer unit price/profitability and highlight channel/category brand mentality; 3) Strengthen the gift market, Launched the new concept of “Global Good Fruit Health Gifts in Baiguoyuan”, and used key festivals to promote it as a mental brand for consumers to buy fruit gift boxes.
The domestic fruit industry has four major characteristics, and the company is expected to continue to grow rapidly. 1) Four major characteristics of the industry: ① Fruit retail still has huge room for growth; ② traditional ToB business urgently needs to improve quality and efficiency; ③ fruit brands are on the rise; ④ unlimited potential in the international market; 2) Development plan for these characteristics: ① plan to expand to over 10,000 stores within 10 years, with terminal retail sales exceeding 50 billion yuan; ② To B's self-operated business revenue reached about 10 billion yuan, and platform business GMV exceeded 100 billion yuan; ③ nurture fruit categories by introducing advanced planting concepts and technology to empower full-chain participation methods such as upstream; ④ Southeast Asia is the preferred brand for overseas markets Will Open up and join in due course to export the Baiguoyuan brand and the commercial model of the fruit franchise retail chain.
Risk warning: Franchise store management risks; extreme weather conditions, natural disasters; food safety; store expansion falls short of expectations; expanding product supply or establishing a successful brand portfolio falls short of expectations, etc.