Incident: Three Squirrels recently upgraded their offline stores and launched multiple store combinations, while optimizing the franchise policy.
Create a diverse mix of store types to reduce the difficulty of choosing a location. In 2023, the company launched a national snack store based on the community scenario, and continuously optimized, upgraded and iterated the store model. In 2023, the company opened a total of 149 national snack stores, achieving revenue of 92 million yuan. Currently, the number of stores nationwide has exceeded 200. The company has launched a total of 5 types of stores: ① flagship stores, with a store area of ≥120 square meters, suitable for community scenarios; ② standard stores, with a store area of ≥80 square meters, suitable for community scenarios; ③ MALL stores, with a store area of ≥100 square meters, suitable for shopping mall scenarios; ④ boutiques, with a store area of ≥40 square meters, suitable for communities and shopping street scenes; ④ stall stores, with a store area of ≥15 square meters, suitable for supermarkets and store scenarios. Different areas adapt to different pallets to meet the needs of consumers in different scenarios, reduce the difficulty of location selection, and thus open up the store layout ceiling.
Optimize franchise policies and reduce investment thresholds and risks. The company updated its latest franchise policy in 2024, focusing on zero franchise fees and zero profit for renovation. The initial investment amount was 100,000 to 300,000 (not including store rent). For stores that have completed site selection and successfully signed contracts before June 5, 2024, the first batch of payment is advanced by the company. If the store is in a loss-making state 3 months after opening, the company can back up the store to reduce the franchisee's investment risk. At the same time, the company provides franchisees with 8 major franchise benefits, including ① authorized use of the Squirrel brand; ② professional development personnel to assist in store site selection and evaluation throughout the process; ③ management rights and professional product team R&D support for all categories of squirrels; ④ sharing training courses at various stages of early preparation, store opening and post-operation; ⑤ exclusive national snack app supports online ordering and data analysis; ⑥ regional professional operation team empowering assistance, 1V1 store guidance; ⑦ professional construction personnel throughout the decoration control and construction inspection, and ⑧ channel brand image dissemination for specific node marketing activities.
The offline layout is further advanced, and the omni-channel business logic is continuously verified. The company insists on omnichannel operation. Currently, online channels such as Douyin are growing well. As an important location for snack sales, offline channels are an important cornerstone for the company to achieve long-term growth. On the one hand, it is actively promoting the construction of distribution channels, and on the other hand, speeding up the layout of offline snack stores. Currently, the company has further opened up franchise regions to all of Anhui Province, all of Zhejiang Province, all of Jiangsu Province, all of Shanghai, and parts of Shandong Province. Compared with other mass snack stores, the company's store types and pallets are highly differentiated. The number of stores is expected to grow rapidly, and the omni-channel business logic is continuously verified.
Investment advice: We expect the company's 2024-2026 revenue to be 101.81/135.63/17.717 billion yuan, respectively, up 43.10%/33.22%/30.63% year over year. The company is expected to achieve net profit of 4.00/576/791 million yuan in 2024-2026, up 82.17%/43.92%/37.23%, respectively, corresponding to the 24-26 PE of 26.0/18.1/13.2X, maintaining the “Highly Recommended” rating.
Risk warning: increased industry competition, channel expansion falling short of expectations, risk of rising costs, etc.