The company's recent situation

On May 29, 2024, the Three Squirrels 2024 Global Ecological Conference was held in Shanghai. We were invited to attend the conference.

reviews

The company positions itself as an ecological economy platform for all categories and omnichannel global collaboration. According to the statement of the founders of the Three Squirrels, the company will firmly implement the overall strategy of “high-end cost performance”. The company is positioned as a retailer first, followed by a manufacturer. The company plans to lay out the supply chain by building its own factory and holding/investing in factories to provide consumers with competitive products.

Product side: The goal of the nut category is to create a 100 million yuan matrix, and the snack category continues to introduce new bestsellers and expand borders. 1) Nuts: After three years, the target sales volume will exceed 13 billion yuan (tax included), including 10 billion yuan for nuts and 3 billion yuan for dried fruit. 2) Snacks: Target sales will triple + after three years, continue to create quality-price single products and expand category boundaries. 3) Little Deer Blue Brand: Positioned as a high-end health snack brand for children, we expect to turn a loss into a profit in 2024.

Channel side: The short video channel model has achieved phased results. Offline distribution and offline community snack shops have proposed mid-term plans. 1) Short video platform: Three Squirrels short video e-commerce has achieved rapid growth through insight into demands+rapid update+efficient distribution. 2) Shelf e-commerce: Through cost optimization, product and sales collaboration, and increasing number of operators, growth will resume and market share will increase in 2023. 3) Offline distribution: The company proposed a mid-term double hundred strategy - 1 million digital terminals plus 10 billion yuan in sales. 4) Offline stores:

Launched a model matrix of five types of new stores, corresponding to the design of ready-to-cook broiled+snack product pallets.

For details on the product, channel, and supply chain side, please read the text below:

We believe that the second round of reforms of the company, which began in 2023, is more thorough: upgrading and improving the underlying capabilities of the supply chain and organization, combined with the integrated growth strategy of product+sales side, product and sales, to help the company enter a new round of growth cycle in the medium to long term.

Profit forecasting and valuation

We keep our profit forecast unchanged. The current share price corresponds to 24.6/19.9 times 2024/25 P/E. Maintaining an outperforming industry rating, we kept our target price of 30.0 yuan/share unchanged, corresponding to about 29.9/24.2 times the 2024/25 P/E, and there is about 21.6% upside compared to the current stock price.

risks

Offline channel development has fallen short of expectations, market competition has intensified, and food safety risks.