Commercial catering equipment suppliers are expected to increase their global share. The company has been deeply involved in commercial catering equipment for 20 years. Currently, its main products are commercial catering refrigeration equipment, buffet equipment and Western kitchen equipment, accounting for 74.0%/6.0%/17.0% of revenue in 2023, respectively. The company's revenue and net profit to mother increased from RMB588/85 million in 2013 to RMB2,511 million in 2023. The 10-year CAGR was 16.3%/19.6% respectively, with steady growth in performance. The company's share of overseas business continued to rise, from 32.2% in 2013 to 90.2% in 2023, and the gross margin of overseas business was better. According to Grand View Research, the global catering equipment market will grow from US$79.7 billion to US$131.7 billion in 2019-2027, and the 8-year CAGR will reach 6.57%. The industry space is broad and steady growth; it is expected that the company will further increase its market share by accumulating brand recognition & pre-sales and after-sales service & cost performance advantages.
Channel side: Formulate plans for 85 countries to promote global sales of independent brands. The company actively promotes the global layout of its own brands. Currently, in overseas markets such as the United States, the United Kingdom, Germany, France, Italy and other countries, it uses the “overseas warehouse+independent sales” model; in Australia and Canada, the OBM business accounts for nearly 80% in 2023. The company formulated the “85 Country Plan” in 2022. In the future, it may expand channels more through “pure agency sales” in other countries and regions, and is expected to contribute to performance in new countries/regions.
Production capacity side: Lay out production in Thailand to enhance cost performance advantages. The company's IPO fundraising projects have all been completed, and production capacity has been greatly increased. The production capacity of commercial catering refrigeration equipment will rise from 42.5 to 525,000 units. Based on production advantages in Thailand, the company is expected to maintain a high cost performance ratio under the premise of the same performance as established overseas brands. In 2023, the company began construction of plot 2 of the Thai production base. Currently, the first phase of the plant has been completed, and it is expected to contribute revenue from 2024.
New product side: Promote “product serialization” and “intelligent equipment”, and open up new spaces for french fries robots.
The company continues to advance the two major strategies of “product serialization” and “intelligent equipment”, and develops new products such as universal steaming ovens and french fries robots. According to Grand View Research's forecast, universal steam ovens will grow at a compound annual growth rate of 9.2% in 2020-2027, and the industry space will exceed 2 billion euros. Based on early customer connections and cost performance advantages, the revenue growth curve of universal steam oven products is expected to improve from 2024-2025. The 2.0 version of the company's smart french fries machine adds automatic sprinkling and automatic packing solutions. It can handle up to 3 different types of food and is equipped with a second dumping table. It has won the 2024 US KI (Kitchen Innovation) Award and will be exhibited at the exhibition on 5.18-5.21. Fast food back-office jobs require high physical strength, are unsafe, difficult to recruit, and have high staff turnover; the company's own brand ATOSA has a perfect after-sales service system in the US, and the 2.0 version can replace more of a labor force than the 1.0 version. According to our estimates, assuming that the penetration rate of French fries robots in American restaurant chains reaches 20%, the company's french fries robot market space will reach 2.9 billion US dollars.
The global market space is vast, nurturing established leaders. Benchmarking global giants, Japan's Hoshizaki has developed into a leading global chiller over 70 years with deep cultivation of refrigeration technology and global channel layout.
Middleby has accelerated the pace of product+market expansion through mergers and acquisitions, and has become a global one-stop catering equipment supplier. The company's own brands are gradually showing leading potential in brand autonomy, market globalization, and product serialization through years of accumulation, promotion of global channel development, and the launch of universal steaming ovens and french fries robots.
Investment advice: We expect the company's revenue for 2024-2026 to be 2,935/33.04/37.18 billion yuan, respectively, up +10.6%/+12.5% year-on-year; net profit to mother will be 687/8.06/932 million yuan, respectively, up 34.5%/17.3%/15.7% year-on-year. Jiechang Drive, AGCO, Honghua Mathematics, and the commercial cold chain equipment company Hairong Cold Chain, which also have the attributes of export equipment in the machinery sector, were selected as comparable companies. Refer to the comparable company's average PE of 21.4X in 2024. Considering the company's high share of its own brands and broad industry space, market share is expected to increase; global channel expansion brings additional growth; the new product growth curve is expected to improve; if the French fries robot passes through subsequent verification, the company will be given a certain valuation premium, giving the company 26 times PE in 24 years, and the target price is 42.46 yuan. Covered for the first time, giving it a “strong” rating.
Risk warning: raw material price fluctuations, exchange rate fluctuations, new product market progress falling short of expectations, inventory management risks.