Strategic transformation and upgrading have been renewed, and performance has continued to increase and results have been remarkable. The Three Squirrels started online, focusing on brand and channel operations, initially using an OEM model to lay out all categories. Under e-commerce platform dividends peaking and traffic costs rising, the 2020 growth rate shift entered a period of deep adjustment. The company took the initiative to streamline long-tail inefficient SKUs, optimize offline stores, comprehensively promote strategic transformation and upgrading in 2022, create a new brand positioning with “high-end cost performance”, promote the transformation and upgrading of development concepts, development paths, and development models, build their own demonstration nut channel factory, increase investment in scientific research, distribution channel expansion and supply chain construction, and “jig+N” Arrange, let the nuts and Health food is accessible to the public. Since 23Q3, the company has achieved rapid revenue and performance growth for 3 consecutive quarters. 24Q1 revenue/deduction was not +91.8%/+92.8% YoY, and the strategic upgrade achieved remarkable results.

Based on the “high-end cost performance” strategy, the supply chain is upgraded to a wing, and all elements of the entire link are integrated and restructured. The essence of the “high-end cost performance” strategy is to provide consumers with lower price products without changing quality, drive supply chain transformation through high-quality channels, restructure the “one product, one chain” supply chain management model, comprehensively sort out all aspects of the value chain of core products based on independent nut manufacturing and snack supply chain collaboration model innovation, and achieve optimal cost, quality, and efficiency, so as to provide consumers with cost-effective high-quality products. At present, the company has created over 1 billion products such as daily nuts, macadamia nuts, shaved beef, shredded bread, etc., and has incubated popular items such as dried mangoes, quail eggs, shakima, and spicy braised gift packs. In the future, it will continue to strengthen a number of large products with “one product, one chain” as the core, and innovate cooperation models to strengthen a number of large products, thus achieving cost improvement and optimization.

Build a “jig+N” omni-channel collaboration system and build an “all-category omni-channel” operation capability. In terms of e-commerce, the company has built a closed-loop e-commerce matrix in the field of short video, including operating capabilities in the three fields of talent distribution, live streaming, and shopping malls. Since June 2023, the company has been at the top of the rest, driving a rapid increase in the overall scale of the company, with short video revenue exceeding 1 billion yuan in a single quarter in 24Q1; actively adjusting the category structure and profit and loss model to achieve contrarian growth for three consecutive quarters in the field of comprehensive e-commerce. In terms of offline distribution, while building a three-section gift channel matrix, the company gradually penetrated regional distribution of Japanese products and increased terminal coverage. In terms of self-branded community snack stores, the single-store model initially ran smoothly and was continuously optimized, and it is expected to continue to contribute to increased performance in the future as store expansion and operational efficiency improvements are improved. In the field of children's health food for children, the construction of the three major categories of “snacks, food supplements, and nutritional products” has been further improved.

Investment advice: In 2024, the company's overall goal is to “return to 10 billion dollars and become stronger in all”. We are optimistic about the company's “manufacturing private brand retailer” business model, “high-end cost performance” overall strategy, and “all-category, omni-channel” business method. The results of the reform are expected to continue to show after the two-way adjustment of category channels. We expect the company's revenue for 2024-2026 to be 106.4/14.70/18.71 billion yuan, respectively, +49.5%/38.2%/27.3%; net profit to mother will be 3.9/6.0/ 790 million yuan, respectively, +75.3%/54.7%/31.8% YoY. The company's 2024/2025/2026 EPS is expected to be 0.96/1.49/1.96 yuan, respectively, and the P/E corresponding to the current stock price is 28/18/13X, respectively. Covered for the first time, giving it a “Recommended” rating.

Risk warning: Channel expansion falls short of expectations, industry competition intensifies, raw material prices have risen sharply, food safety risks.