Focusing on the bird's nest industry for more than 20 years, we have rich experience in operating bird's nest products. Established in 1997, Swallow House is a leading brand in the Chinese bird's nest product market. The founder and chairman of the company has been involved in the bird's nest industry since the company was founded, leading the team to develop innovative bird's nest products such as freshly stewed bird's nest and “bowl yan”, which established the company's leading position in the bird's nest industry. The company's revenue for 2023 was $1,964 million, up 13.5% year on year, and adjusted net profit under non-GAAP was $244 million, up 15.8% year over year.
China is the most important consumer of bird's nest. There are many market participants without specialties, so there is plenty of room to increase the market share of swallowtail houses. According to Frost & Sullivan's data, in 2022, China's bird's nest market reached 43 billion yuan. China accounts for 70% of the world's bird's nest consumption, and China is the most important consumer of bird's nest. Frost & Sullivan expects the market size of China's bird's nest industry to reach 92.1 billion yuan in 2027, with a CAGR of 16.5% for 2021-2027E. Judging from the competitive pattern, the bird's nest industry in China is scattered. CR5 is only 11.9%, of which the market share of Tsubazhiwu is 5.8%. Most of them are multi-category hybrid bird's nest brands, mainly OEM. There are relatively few bird's nest head brands that are deeply involved in the industry, such as Swallow's House. Competition has significant advantages, and is expected to continue to increase its market share.
The core competitiveness of Tsubayashiya lies in its rich product matrix, deep-seated brand image, national sales network, and membership system of over 1.8 million people, which is deeply rooted in the bird's nest industry:
1) In terms of products, the company focuses on making high-quality bird's nest and is the founder of Wan Yan. Currently, it has formed four major product lines of pure bird's nest and bird's nest product matrices. The product richness is significantly higher than that of competitors. In addition to the advantageous Wan Yan and freshly stewed bird's nest, rock sugar Guanyan is growing rapidly as a cost-effective drainage product, and bird's nest porridge has great potential for development.
2) From a brand perspective, the company pioneered the brand through star demonstration. In 2008, it quickly exploded the market through Carina Lau's endorsement. Since then, it has invited many celebrities such as Pu Cunxin, Lin Zhiling, Zhao Liying, and Jin Chen. In 2024, Gong Li was invited as a global spokesperson, and is committed to making Yan's House a leading bird's nest product brand. According to Ipsos's 2023 Brand Health Tracking Report, Swallow's House's brand awareness and first mention rate is in the leading position in the bird's nest industry.
3) In terms of channels, online: The company sells products through its own online stores, dealer online stores and e-commerce platforms. The revenue of online channels in 2023 was 1,104 billion yuan, accounting for 56.2% of revenue, up 17.7% year on year. E-commerce is in a stage of rapid growth. Offline: The company has a nationwide offline sales network, covering 96 self-operated stores and 647 dealer stores nationwide (as of December 31, 2023), and the number of the company's bird's nest franchise stores ranks first in the country. As of November 20, 2023, the company's membership plan has covered more than 1.8 million customers, and registered paying customers in 2022 accounted for 23.5% of the total registered customers. We expect the company to gradually increase the conversion rate of registered customers in the future through various membership services such as the Swallow House Mini Program and the Jin Yanhui Membership Program, and there is plenty of room for growth.
We believe that the current market size of the bird's nest industry is more than 40 billion, there are many but not specialized market participants, and the industry concentration is low. The company has accumulated brand power in the bird's nest industry for a long time, rich product operation experience, and broad and deep channel coverage. The company is expected to occupy the minds of consumers and achieve an increase in market share through continuous product innovation and continuous improvement of brand power. We expect the company to achieve net profit of 2.52/2.81/312 million yuan in 2024-26, an increase of 25%/12%/11% year-on-year, EPS of 0.54/0.60/0.67 yuan/share, respectively, and corresponding PE of 15X/13X/12X respectively, covered for the first time, giving it a “recommended” rating.
Risk warning: Food safety risks, the risk that the company's new product promotion falls short of expectations, the risk of increased market competition, and the risk that terminal demand falls short of expectations.