Baoli Foods: Deeply involved in customizing meals for decades, making it easy to find breakthroughs in fast food. The company began with Yum Sheng's supply chain, has been deeply involved in the field of Western-style compound condiments for 20 years, and has achieved steady growth in the B-side customized meal preparation business through continuous expansion of customers and categories; with the company's strategic layout of light cooking, tea and dessert ingredients, the company began to work hard on the C-side and incubate large items such as empty pasta to create a second growth curve; in the context of B-side recovery, chainization, and C-side expansion channels to create explosives, the company's main business will achieve two-wheel drive growth.

B-side business: Yum secures the company's basic market, and R&D establishes a competitive advantage. With the development of restaurant chains, condiments are evolving along the path of “basic condiments - compound condiments”, and there is still a lot of room for improvement in penetration rate in the future. The company is positioned as an integrated comprehensive solution provider, providing customers with integrated solutions integrating design, R&D and production. With Yum's foundation and its strong R&D advantages, the company has continuously broadened its large enterprise customer base, and introduced new categories such as baking to build a strong moat for its B-side business. Over the past few years, B-side overall demand has been under pressure, and the company has continued to expand cooperation categories within the large customer system with a high level of R&D capabilities. At the same time, the company deepened the depth of cooperation with existing major customers and enhanced customer stickiness. Yum China increased the capital of Baoli's subsidiary, so the two sides can complement each other's advantages in multiple dimensions in the future. Furthermore, the company continues to expand its customer base, and is expected to further penetrate into mid-sized customers in the Western-style fast food, tea and coffee industries in the future, thereby leading to revenue growth.

C-side business: Empty pasta has become a leader in the fast food pasta industry, adapting the brand style to market changes.

Under Kitchen Affin Trading, Kongke Pasta is an up-and-coming brand that first proposed the concept of “light cooking fast pasta” and began large-scale marketing. At the same time, Kongke has food safety and price advantages, and at the same time accurately selects products and creates strong product capabilities, which has become the cornerstone of Kankoku's development. At the same time, using a combination of online and offline marketing, the popularity and influence of empty pasta has achieved breakthroughs and expansion. It has been in the top sales volume in the fast food pasta category for three years, and has become the leader in the fast food pasta industry. Although online growth has slowed in the short term, the company continues to strengthen its competitiveness through the launch of new products with low customer unit prices and the layout of offline channels. In 2023, Kongke's offline target is to cover 7,000+ stores. It has now entered supermarket systems such as Walmart, Da Runfa, and Hema. Offline channels may become an important complement to Kongge's growth in the future. At the same time, with the subsequent recovery in consumption power, we are still optimistic about returning to a high growth trend.

Profit forecast and valuation: The company's 24-26 revenue is expected to be 2.75/3.17/3.64 billion yuan, respectively, up 15.9%/15.4%/14.8% year on year, net profit attributable to the parent company is 0.28/0.33/0.38 billion yuan, the annual growth rate of net profit to mother is -6.2%/16.1%/16.3%, EPS is 0.71/0.82/0.95 yuan, and the corresponding PE is 17/14/12 times. The company's reasonable valuation is 12.71- 14.12 yuan, an 8%-20% premium over the current stock price, giving it an superior market rating.

Risk warning: the penetration of compound condiments falls short of expectations; development of new customers falls short of expectations; prices of upstream raw materials fluctuate greatly; food safety risks; industry competition intensifies.