It has a functional, clear price-ratio advantage, and a unique vision. Qiankun Dongpeng Drinks is still growing well in the current context of the steady growth rate of the consumer market and the soft drink industry. In 2023, the sales volume of the big single product Dongpeng Special Drink exceeded 10 billion dollars, and hydration led to the beginning of the second curve.
In response to market concerns about Dongpeng's growth space after 10 billion dollars in revenue and the difficulty of transforming into a platform-based enterprise, we believe that 1) the energy drink circuit conforms to the trend of healthy functionality, and Dongpeng may be able to take advantage of the trend; moreover, the company's internal logic of focusing on the sinking market fully fits the current price ratio consumption trend; Dongpeng Special Drink's revenue of 20 billion dollars can be expected under the multiple penetration of racetrack expansion+nationalization and sinking.
2) The development of the second curve requires identifying the track to reuse channel advantages, replenish water and quickly gain momentum or reflect Dongpeng's vision and strength, create cost-effective differentiated products against competing products, and promote the company's successful transformation.
EPS is expected to be 6.55/8.19/10.00 yuan in 24-26, maintain the target price of 235.80 yuan, and “buy”.
At the industry level: Companies need to follow the trend, grasp the two major directions of price ratio and functionalization, and the soft drink industry entered a mature stage of moderate growth after 2015. The competitive model of extensive horse racing is no longer applicable. The market tests the level of refined management of enterprises, and the creation of large single products needs to follow the trend even more. We have observed two relatively obvious trends in the industry: 1) price-price ratio: consumers pay more attention to the quality of products obtained per unit price, and are more optimistic about high-quality large products that already have a significant market base, quality and price advantages; 2) Functionalization: Emerging derivatives that meet healthy functionality are expected to become “small surprises in large categories”, making it easier to run out of the new era of big products with a certain volume and market influence. The energy drink circuit fully fits the trend of functionalization and has both space and prosperity; moreover, both high and low tier cities have rigid requirements, and the market is downward compatible or smoother, and the leaders are expected to fully enjoy the dividends of industry expansion.
Company level: Dongpeng Specialty Drinks is growing rapidly, and the second curve is looking for opportunities
1) Dongpeng Special Drink: High quality energy drink tracks guarantee a high ceiling. In 2023, Dongpeng Special Drink has joined the 10 billion single product group for soft drinks. Reviewing the past, the company's core development logic was to open up a sinking market with a higher price-price ratio, optimized design, and strong channel power to achieve nationwide penetration by “surrounding the countryside”.
Looking forward to the future, there is room for improvement in the target population of Dongpeng Special Drink and its penetration rate outside the province. We estimate that the medium term space could reach 20 billion +. 2) Second curve: The second curve track selected by the company should have the characteristics of “high prominence and high channel resource adaptability”. The focus can be on electrolyte water/sugar-free tea/cocktail tracks: the trend of electrolyte water/sugar-free tea/cocktail, etc.: the trend after the electrolyte epidemic, accurately meets the needs of Dongpeng's niche population, and the sales target of 1 billion dollars can be expected in 2024; sugar-free tea is in the spotlight, and oolong tea has more advantages in the sinking market.
Dapeng spreads its wings, aims high, and maintains a “buy” rating
Optimistic about the nationalization of large single products and the potential for the second curve, the 24-26 EPS is expected to be 6.55/8.19/10.00 yuan. Referring to the 24-year average of 24x PE (Wind's consistent expectations), its 23-25 net profit CAGR (32%) is faster than that of comparable companies (22%), giving it a 24-year 36x PE, maintaining a target price of 235.80 yuan, and maintaining a “buy” rating.
Risk warning: New product promotion falls short of expectations, fluctuating raw material prices, food safety issues.