Recently, we attended the 2023 Shareholders' Meeting of Juwei Foods. The company reviewed the business situation in 2023 and exchanged answers on core questions such as key tasks and development strategies for 2024. The core feedback is as follows:

The business focus has changed, paying more attention to business quality and consumer experience: the company's business focus has shifted from focusing on expanding share in the past to intensive cultivation, and the management side is paying more attention to single-store revenue growth (assessment core).

At the same time, from a business perspective, from the previous focus on shipping to franchisees, to focusing on the consumer experience. Faced with problems such as high public domain traffic costs and low sustainability, the company plans to gradually increase investment in building a unified identity for omnichannel members, hoping to open up private traffic, drive consumers to repurchase with high cost efficiency, and enhance stickiness.

The company actively seeks change, proposes “omni-channel digital intelligence growth”, and explores measures to improve store efficiency in multiple directions. Jewei proposed “omni-channel digital intelligence growth” as a starting point for improving the efficiency of single-store stores, and began implementation in the second half of last year. It mainly promoted implementation at the following five levels, and achieved certain results: 1) Douyin store testing: From September 23 to March 24, the company's Douyin transaction order volume reached 24 million+, brand exposure exceeded 3.9 billion, and achieved driving in-store consumption through Douyin; 2) Improvement of sales & profit on takeaway platforms: sales increased 14.86% year-on-year; 3) Cross-border IP and strategic cooperation: Yuanmeng Star Gaming collaborates to create virtual and Realistic new consumer experience, adding 100w+ users; 4) Super hot product marketing: successfully created a hot product during the Spring Festival, achieving 1 million barrels of sales in 39 days; 5) Building a smart AI system to empower store managers: improve organizational efficiency through excellent case sharing, AI generation of marketing materials, etc., and the system has red envelope rewards to motivate store managers. In terms of specific measures, we can sense the company's determination and ability to act to improve operational efficiency.

Focus on the main marinated food business to improve the efficiency of asset use. In terms of capital expenditure: 1) Fixed asset investment: The company's current production capacity/production capacity+ projects under construction can support operations until 2029/2030-2031, and the possibility of large future fixed asset investment is low; 2) Investment: Some early projects recover cash through dividends/management buybacks, etc., and the company slows down investment. The investment ratio does not increase in the future, reducing investment in non-marinated racetracks, focusing on the integration of the strategic core flavor circuit.

Actively respond to challenges and focus on long-term development. Although the company has faced certain pressures and challenges on the business side since 23H2, management has responded positively, focused on long-term development, and piloted measures to improve the efficiency of single-store stores in multiple dimensions. Looking forward to the future, we believe that with the advancement and implementation of the company's various measures to improve store efficiency, the store management side is expected to gradually recover under a low base. Cost & cost side: Currently, duck raw materials are at a stable low level. The cost side has improved significantly compared to last year, and the company is committed to high-quality development. In principle, it does not participate in price wars. Judging from the pace of cost investment, the company's budget investment pace for this year has been delayed (probably after mid-late June), and there is some room for improvement on the cost side. We expect the company to invest less in capex in the future, pay more attention to improving the efficiency of asset use in operations, and expect the dividend ratio to be maintained or further increased (90% in 2023).

Profit forecast: We expect the company to achieve operating income of 78.22/83.76/8.935 billion yuan respectively in 2024-2026, up 7.72%/7.08%/6.67% year-on-year, and achieve net profit of 813/9.45/1,090 billion yuan respectively, up 136.21%/16.22%/15.29% year-on-year. The corresponding PE is 16.01/13.77/11.95 x, maintaining the “recommended” rating.

Risk warning: raw material prices fluctuate greatly; industry competition intensifies; single-store revenue recovery falls short of expectations, etc.