The two main businesses are developing steadily, and Pioneering has formed a long curve. For the first time, it has covered companies with “increased holdings” to form a dual-driven development strategy centered on coconut juice and canned fruit, while actively promoting product innovation, creating a new growth curve through new products such as coconut water and thick coconut milk, and using distribution channel networks to achieve a national regional layout. We expect the company's net profit for 2024-2026 to be 340 million yuan, 410 million yuan, and 480 million yuan, respectively, +22.6%, +19.3%, and +17.6% year-on-year, and EPS 0.76, 0.91, and 1.07 yuan respectively. The current stock price corresponds to PE of 20.3, 17.0, and 14.5 times, respectively. For the first time, coverage gave it an “increase in wealth” rating.

Benefiting from healthy consumption and the development of ready-made tea drinks, coconut juice drinks have great potential for growth. As living standards improve, consumer demand for healthy and high-quality coconut drinks is increasing. At the same time, the current coffee circuit is rapidly rising, driving the B-side market for coconut juice to usher in rapid development. The company launched a coconut juice product in 2014. It has been deeply involved in the C-side market for many years, and has a good brand influence. The market share is stable at the top of the industry. Coconut juice revenue CAGR reached 9.6% in 2017-2023. In 2023, the company actively developed new developments. On the one hand, it closely followed the trend of healthy consumption, launched a new category of coconut water, and laid out a young consumer base; on the other hand, it launched thick coconut milk products for the B-side coffee market, creating a new growth curve for the coconut juice business.

With improved awareness and acceptance of canned fruit and the expansion of diversified scenarios, China's processed fruit and vegetable market is expected to grow steadily to 13.68 billion yuan in 2022. With diversification of products and an increase in consumer groups, it is expected to maintain a compound growth rate of 5% in the future. The company has been deeply involved in the canned fruit industry for more than 20 years, mainly producing canned yellow peaches and oranges, and also has a variety of canned fruit products. The end of 2022 benefited from the increase in the popularity of canned yellow peaches, a marked improvement in consumer awareness and acceptance, and the company's canned fruit grew rapidly. Currently, the company is actively deploying casual small-packaged canned products in mass sales channels, and is expected to grow well.

Advantageous regions will increase investment, and weak regions will increase gap market coverage. It is expected that the dealer size will continue to increase, and the company's sales network will basically cover the whole country. The dominant regions of central China and southwest China will increase investment to continue to consolidate brand awareness and market share within the region. The North China, Northwest China, and Northeast China regions are affected by the geographical environment, and there is still plenty of room for improvement in empty market coverage in the future. The company adopted flat and sinking development in distribution channels. By adding outlets and expanding channels, the company continued to develop terminal outlets, and achieved steady growth in the number of dealers in multiple regions.

Risk warning: the risk of raw material price increases, food safety risks, new business development, and macroeconomics falling short of expectations, etc.