We have tracked the company's business situation. Based on market concerns, we have the following feedback:
What is the difference between the company's current reform and previous years?
In the 2023 reform and adjustment, the company mainly focused on refining and enriching channels and products, while strengthening the adaptability of products and channels, which is a further extension of the original organizational structure. The 2024 reform involves adjustments to the company's organizational structure, optimizing the original four-level management system to a second-level management system with city managers as the core. City managers closer to the terminal have the right to manage and operate personnel, customers, and markets, which helps enterprises to more keenly perceive market trends and enhance team execution, so as to cope with competition and incremental development. Although the company may inevitably enter a run-in and adjustment period for some time to come, it provides a guarantee for a longer-term growth center. Because of this, we believe that this corporate reform should be given more attention.
What do you think of this frozen product price competition?
On the one hand, in the current market environment, we believe price competition is inevitable; on the other hand, leading companies also pay more attention to reducing the impact of market competition through innovative products and products with a certain premium. As far as Sanquan is concerned, on the one hand, for medium- and low-price products, the company will invest more actively and in a targeted manner in the market, but it will not pursue excessive spending, grasp the pace of price competition, and maintain the basic market. For products in the middle to high price range, the core of the company is to pursue product innovation. For example, the “cook and fry, whatever you want” gyoza king series launched by the company uses a peeling process that is not easy for home consumers to use and reduces cooking time; on rice balls, the company will launch health products with concepts such as crude fiber, zero additives, and the same origin of medicine and food. In terms of the long-term development of an enterprise, the model of simply pursuing low prices is not long-term; how to enhance brand power through product innovation is even more critical.
How do you view the company's expansion of the Big B channel?
On the one hand, as major companies have expanded production over the past few years, the market supply has exceeded demand for Big B customers. From a commercial perspective, Big B customers have the motivation to optimize the supply chain; on the other hand, the core of the Big B channel is product power and supporting service capabilities (response speed), so if companies pay enough attention, the Big B channel is also expected to increase. Since 2023, Sanquan has focused on the development of the Big B channel. The personnel have been gradually expanded, and the assessment mechanism and resource collaboration have all been optimized. As a result, the company has achieved certain breakthroughs in important catering customers, and Sanquan, as a traditional C-end frozen product leader, has a sufficient product strength foundation. Subsequent companies are still expected to expand their advantages and create incremental growth in the Big B channel.
Profit forecasting, valuation and rating: The company's organizational system reform is expected to increase channel momentum, and the Big B channel is expected to contribute a certain amount of growth. We raised the 2024/25/26 net profit forecast to 7.50/8.73/966 billion yuan, up 3%/10%/7% from the previous one. The current stock price corresponds to the 2024-26 PE valuation to 15/13/12 times, maintaining the “increase” rating.
Risk warning: downstream demand is slowing down, raw material costs are rising, and new product sales fall short of expectations.