Introduction to this report:
The launch of new products is expected to drive the company's revenue growth and structural optimization, combined with channel expansion and supply chain strengthening, and it is expected that the company's growth potential will be further unleashed.
Summary:
Investment recommendations were covered for the first time, and a “gain” rating was given. The company's 2023-2025 EPS is expected to be 0.40, 0.49, and 0.59 yuan, respectively, +523.3%, +22.0%, and +20.6%, respectively. Based on FCFF and PE estimates, the target price is 7.84 yuan, corresponding to HK$8.52 (1HKD = 0.92 CNY).
Advantageous categories are being promoted at an accelerated pace, and the proportion of high-margin categories has increased. With seasoned noodle products as the core, the company expanded the second curve of spicy casual vegetable products. In 2018-2022, the revenue CAGR for vegetable products reached 54.4%, and konjac sales exceeded 1 billion yuan per year, making it the company's second most popular item after gluten. Konjac's success led to a rapid rise in the revenue share of vegetable products, rising from 10.8% in 2018 to 40.1% in 2023H1. Based on the successful experience of large gluten and konjac, the company continuously launched differentiated new products in the dominant categories in 2023: Spicy Spicy, Overbearing Panda, and Little Witch, with positive market feedback. The release of new products is expected to become a new driving force for revenue growth, while driving the continuous optimization of the company's product structure.
Traditional channels continue to be reformed, and emerging channels are being actively expanded. Weilong's sales side gradually developed from relying on traditional offline channels to diversification. Before 2015, it mainly relied on the provincial generation model to develop traditional channels. Subsequently, it gradually expanded modern channels through a series of reforms, continued to optimize the distribution network and implement refined operations, strengthened channel cooperation through auxiliary marketing and marketing support, and continuously improved channel coverage and efficiency. In recent years, the company has adapted to changes in consumer demand and channel structure, actively laid out incremental channels such as online platforms and snack sales chains to seize new growth opportunities brought about by channel expansion.
Improve brand power and strengthen supply chain. The company attaches importance to brand building, invests in brand building for a long time, and takes the initiative to standardize the industry. Through lean and intelligent production and innovative brand marketing, the company is expected to continue to improve its brand strength. The company continues to lay out production lines, supports long-term expansion of production capacity under construction, and continuously optimizes production and operation efficiency and strengthens supply chain advantages through production line upgrades and direct procurement from the source.
Risk warning: New product promotion falls short of expectations, channel competition intensifies, and structural adjustment transmission is weak.