The Zhitong Finance App learned that Fangzheng Securities released a research report stating that it covered Baiguoyuan Group (02411) for the first time and gave it a “recommended” rating. The estimated net profit for 2023/24/25 is 3.44/3.52/466 million yuan. Baiguoyuan continues to make efforts in terms of store network, supply chain, brand image, etc., and has accumulated strong competitiveness. With the introduction of a brand strategy upgrade in 2024, it is expected that individual store revenue and brand image will be further enhanced. The company lays out fruit and overseas businesses around the fruit industry, and is expected to form a systematic layout and become a new growth curve.

The main views of Fangzheng Securities are as follows:

Deeply involved in the industry for more than 20 years, creating the number one fruit franchise retail brand.

Baiguoyuan was founded in Shenzhen in 2001. It specializes in fruit retail. In 2009, it launched the “Three No Returns Service Standard”, creating the original “four degrees, one flavor, one safety” fruit rating standard. Baiguoyuan's revenue reached 11.3 billion yuan in 2022. In terms of industrial layout, the company held the Banguo platform in 23, laid out the TOB supply chain business, and continued to expand upstream, empowering the growing side and building strong brand barriers around 35 signature fruit categories.

The scale of the fruit retail industry continues to grow, sinking the market, stratification of consumption, or bringing new opportunities for industry development.

The compound growth rate of China's fruit retail industry from 16 to 21 reached 8.25%. The upstream and downstream industrial chains are characterized by fragmentation, and it is expected that large fruit supply chain companies will emerge to integrate channels to improve efficiency. Currently, fruit consumption has the following consumption trends: ① With per capita GDP growth and urbanization, fruit retail sales still have room to grow, and per capita fruit consumption in the sinking market is growing rapidly. ② The hierarchical consumption structure of consumption promotes the development of branding in the fruit industry.

Integrate the supply chain vertically, pioneer a fruit quality grading system, and increase brand premiums.

On the planting side, Baiguoyuan participated in upstream cultivation to help improve fruit and increase planting efficiency through agricultural technology, information technology, and capital empowerment. On the transportation side, process efficiency and turnover are improved through optimization of procurement processes and cold chain storage systems, and losses are reduced. The sales side grades fruits and launches its own brands to create greater profit margins through brand premiums.

Using the fruit franchise model to expand stores nationwide, direct sales are growing rapidly.

Franchising helped the sales network expand rapidly. As of January '24, the company had more than 6,000 stores nationwide. The company helped increase store revenue through various online channels. As of 23H1, the proportion of online orders was 28.8%. Direct marketing TOB provides products directly to enterprise users and is a fast-growing supplementary channel. In 2023, H1, direct sales revenue reached 548 million yuan, an increase of 34.7% over the previous year.

Holds the Banguo B2B trading platform and comprehensively lays out the B-side market.

Banguo has now reached long-term cooperation with more than 1,700 suppliers. The number of registered users on the platform exceeds 500,000, and 178 urban warehouses have been set up in 125 cities in 14 provinces across the country. In the first three quarters of 2023, the total transaction volume of the platform reached 2.4 billion yuan.

The brand upgrade is expected to drive the company's long-term growth.

In January '24, Baiguoyuan held a brand conference and proposed three major strategies: 1. Renewal of the strategy and comprehensive image upgrade of 6,000 stores; 2. Signature fruit lead the strategy to increase the proportion of signature fruit; 3. Strengthen the gift market and launch designer gift boxes. Baiguoyuan is expected to improve product quality and increase customer traffic, and drive long-term performance development.