It later became the leader in the marinated food industry, focusing on high-quality development. Reviewing the amazing development process, we discovered that although the company was founded later than Zhou Heiya/Huangshanghuang, with 1) strategic vision and strong execution, it implemented a “racerback, saturated store opening” strategy in the early stages of industry chain expansion & low concentration & rapid growth rate to take the lead in achieving nationwide coverage of 10,000 stores; 2) Supply chain & channel management internal skills: continuous refinement of internal skills to guarantee rapid store expansion. The company later took the lead and became the first in the casual halo circuit. By the end of 2023, the company had 15,950 stores, far higher than other companies in the same industry. Under marginal changes in the industry, the company made strategic adjustments to focus on high-quality development, and the assessment goal was to improve the efficiency of single-store stores in 2024.

Under marginal changes in the industry, leading enterprises have switched to intensive farming. Looking at the overall industry environment: Affected by the “increased competition in the consumer environment+diversified choices”, the revenue and sales volume of major companies in the braised food industry are under pressure, and store efficiency has not recovered to the level of 19 years. We analyzed the management outlook section of leading companies' 20-23 financial reports. Earlier, leading companies judged that “industry concentration will further increase”, and market share expansion is the top priority in the next year's strategic plan. Beginning in '24, all companies (with the exception of Huang Shanghuang) took the initiative to slow down the pace of store expansion and shift their focus to improving store efficiency. Since the second half of '23, Zhouwei has used “omni-channel digital intelligence growth” as a starting point to improve store efficiency in multiple dimensions. Currently, it has achieved certain results. This year, the company will focus on increasing investment in building a unified identity for omnichannel members, hoping to open up private domain traffic, drive consumer repurchases with high cost efficiency, and enhance stickiness.

The pace of investment is slowing down, and the efficiency of asset use is expected to improve. Previously, Zhouwei spent a lot on investment (capacity construction & foreign investment layout). On the one hand, it raised the level of fixed assets, which had a certain drag on ROE; on the other hand, due to the external environment, the company's performance of foreign investment targets was under pressure, and investment losses caused a certain drag on the profit side. In the future, the company will strategically focus on the main marinated food business to improve the efficiency of asset use. Specifically: 1) Investment in fixed assets: the company's production capacity/production capacity+projects under construction can support operations up to 2029/2030-2031, respectively; 2) Foreign investment: Starting in '23, the foreign investment layout has slowed down at a rate, and the total volume will not increase significantly in the future. The ratio (equity investment accounts for total assets) is not expected to increase further, focusing on the integration of the braised circuit. In terms of direction, reduce investment in non-marinated tracks and focus on strategic core braised track integration; 3) Looking at the current target situation: Braised Core Track Investment: Zhouwei lays out a “one ginseng, one control and one combination”. The core targets of Liao Ji, Jia Jiangnan, and Aman Passion Chicken are based in Sichuan and Chongqing & Hubei/Jiangsu/Jiangsu respectively, and focus on the subsequent recovery of each brand's single-store side and regional expansion of stores. Among them: Liao Ji is Zhuwei Holdings (total shareholding ratio of 46.73%). Overall performance was steady in '23, single store growth was good, and terminal sales were +22% year-on-year. By the end of April '24, Liao Ji had 700+ directly-managed stores. Liao Ji's plan to expand stores in '24 will continue to advance in an orderly manner, continuing to cultivate the two major base markets, and target the number of stores to reach 1,000. Foreign investment: The investment ratio is not expected to increase further. Existing projects actively seek exit opportunities to promote mergers and acquisitions and integration of enterprises. At the same time, some projects recover cash through dividends/management repurchases, etc.

Profit forecast: 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: 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. We think the 24-year improvement in profitability under the cost dividend is very certain. We expect revenue of 7.81/8.45/9.09 billion yuan in 24-26, +7.6% YoY/+7.6%, and net profit to mother of 0.76/0.87/1.02 billion yuan, or +120.2%/+15.1%/+16.4% YoY. The corresponding PE is 12.03/10.45/8.98 x, maintaining the “recommended” rating.

Risk warning: store recovery falls short of expectations, rising raw material prices, intensifying industry competition, etc.