Report highlights:
Meizhika: Premade cuisine expert based in the Yangtze River Delta
Suzhou Weizhixiang Food Co., Ltd. focuses on semi-finished dishes. It was founded in 2008 and listed on the Shanghai Stock Exchange in 2021. With 23Q1-3, the company achieved total revenue of 619 million yuan (+1.92%) and achieved net profit of 107 million yuan (-2.90%) to mother. The actual controller of the company is Mr. Xia Jing, the chairman and general manager. As of 23H1, he controlled 62.25% of the company's shares. There was no equity pledge, and the control was stable.
New production capacity has been steadily released, and cost pressure has been relieved
1) Break through production capacity bottlenecks and gradually release new production capacity. The company's production capacity was saturated in 21/22, and the utilization rate was close to 130%. The project with an annual output of 50,000 tons of production capacity invested in the IPO was implemented. The company's design capacity reached 65,000 tons/year. Currently, about half of the new production capacity has been put into use, and the remaining production capacity is gradually released as needed.
2) The cost pressure is gradually easing. The company's raw material costs account for more than 90% of the main business costs. Among them, the direct cost of beef products accounts for more than 40% of the main business costs. Costs continued to be high in '21 and '22, and raw material prices gradually declined in '23, freeing up profit margins. The gross margins of 23Q1, Q2, and Q3 companies were +1.39, +2.03, and +2.39pct year-on-year.
Store-style retail is unique. After the street store model is validated, it is expected to usher in improvements 1) The dual brand positioning is clear, and various SKUs meet diverse needs. The company specializes in ready-to-cook semi-finished dishes (not cooking packages). Its “Meizhixiang” and “Zhuanyu” target the C and B sides respectively, and have 8 major product lines, with more than 300 SKUs, which effectively meet the needs of different eating habits and different scenarios.
2) Build a B+C multi-channel network to create a characteristic store layout. The company mainly focuses on distribution (accounting for about 95% of revenue). Retail channel dealers are divided into dealerships and franchise stores. They operate the Weizhixiang brand for the C-side, and the wholesale channel dealers operate the Zhuanyu brand for the B-side. Currently, in distribution channels, C-side revenue: B-side revenue is about 2. 5:1. The company is deeply involved in Jiangsu, Zhejiang and Shanghai, and has established a network of specialty stores, mainly farmers' market stores. As of 23Q3, the number of company dealerships, franchisees and dealers was 1,798, 726, and 519, respectively.
3) Traditional channels are temporarily under pressure, and new channels such as street stores, supermarkets, group meals, and restaurants are actively being developed. Affected by factors such as fluctuations in the consumption situation over the past 23 years, the store and wholesale side have been actively developing new channels: the C-side development of street stores and in-supermarket stores. Currently, the street store model works well in second-tier and third-tier cities in East China. It has developed 60 supermarket customers including Hema and Da Runfa, and the Q1-3 supermarket channel has achieved revenue of 0.23 million yuan; the B-side has increased the development of hotel restaurants, school and unit cafeterias, social catering, etc., and 23Q1-3 direct sales and other channels achieved revenue of 0.11 billion yuan, compared to the same period last year.
The scale of the prepared food industry exceeds 400 billion dollars. Supply, demand and policies promote the increase in the living standards of growing residents, the increase in the urbanization rate, the increase in the proportion of households with two workers, the rapid development of takeout and restaurant chains, etc., driving the increase in demand for prepared dishes. The continuous improvement of cold chain logistics facilities provides conditions for broadening the sales radius of prepared dishes. “Cultivating and developing the prepared food industry” was included in the Central Committee Document No. 1 of '23.
According to Ai Media Consulting data, in 2022, the market size of China's prepared food industry was 419.6 billion yuan, +21.31% year-on-year, and 19.73% CAGR in 19-22.
Profit forecasts and investment advice
We expect the company's net profit to be 1.44/1.69/199 million yuan respectively in 23/24/25, with growth rates of 0.26%/17.95%/17.78%, respectively, corresponding to 31/26/22 times PE on January 22 (market value of 4.4 billion yuan), giving it an “increase in holdings” rating.
Risk warning
Food safety risks, risk of underutilization of production capacity, risk of fluctuations in single store revenue.