The Zhitong Finance App learned that according to the research report released by Open Source Securities, the first “buy” rating for Baiguoyuan Group (02411) is estimated to have a net profit of 3.58/3.58 billion yuan in 2023-2025, corresponding to EPS of 0.23/0.23/0.27 yuan. As the largest fruit retailer in China, the company has achieved a full industrial chain layout from fruit cultivation to terminal retail; the company officially launched a golden ten-year strategy aimed at continuously strengthening core competitive advantages such as supply chain capacity, channel scale and brand image. In the future, franchise chain stores will contribute steady growth as ballast stones, and the ToB business is expected to open up new growth space.
The main views of Open Source Securities are as follows:
Fruit retail industry: large market concentration is low, channel diversification and product quality are important trends
China's fruit retail market is over trillion yuan, but the concentration is low (CR5 is less than 5%); for a long time, low supply chain efficiency, high loss rates, and lack of a standardized system have been pain points in the industry. In recent years, there has been a clear trend of modernization of China's fruit industry chain, diversification of channels, and refinement of daily demand. We believe that mature retailers based on modern supply chain capabilities are expected to export standardized systems to the entire industry chain, seize opportunities in the transformation and upgrading phase of the industry through better channels/product brands, cultivate consumer mentality with outstanding product quality and shopping experience, and continue to win the favor of more customers and expand market share.
Baiguoyuan released the “Golden Ten-Year Strategy” to build a fruit ecological technology company
(1) Ten-year strategy: In January 2024, the company released the “Golden Ten-Year Strategy” and a number of detailed “three-year plans”, which proposed focus points such as brand renewal, new business layout, overseas market development, and industrial ecosystem construction.
(2) Based on offline channels: The company's stores are characterized by “being close to the community, online and offline integration, storehouse integration, and integration of timely delivery and next-day delivery”. The franchise model is the core, adapts to the fruit consumer branding trend and expands from high to low tier city markets, and attracts franchisees with mature franchise models and one-stop support capabilities.
(3) Brand upgrade to a wing: The company has both product and channel brand awareness and creates competitive barriers based on the supply chain; it has created its own fruit grading system, empowers partners on the growing side, and has built mature infrastructure on the warehousing and logistics side.
(4) Digital intelligence tandem ecosystem: The company integrates the entire industry chain through digital intelligence capabilities to create a unique fruit ecosystem; in October 2023, the company laid out the ToB market by holding Shenzhen Banguo to cultivate a new growth curve.
Risk warning: weak consumption, increased market competition, brand upgrades falling short of expectations, channel expansion falling short of expectations.