Industry leader, improving quality and efficiency. The company is the first frozen noodle company in China. It has two famous brands, “Sanquan” and “Longfeng”. It has production bases in Zhengzhou, Foshan, Chengdu, Tianjin, Suzhou, Wuhan, etc., and is one of the largest enterprises in the industry with the widest market network. The company's revenue/net profit after deduction for 2004-2023 CAGR is 14.06%/24.25%. In recent years, the company's revenue scale has remained stable, and profit margins have been clearly repaired by improving quality and efficiency, and net interest rates without return to mother have remained in the 8%-10% range.

Product structure optimization, R&D efficiency improvement. In 2020-2033, the share of revenue from noodle and rice products continued to decline and prepared food continued to rise; according to industry classification, the share of retail and innovative markets continued to decline in 2018-2023, profit margins continued to rise, and the share of the catering market continued to increase, and profit margins were stable. In terms of R&D promotion, the company's R&D in recent years has been more consumer-oriented. R&D efficiency has been improved, the degree of matching scenarios and channels has been highlighted, and many new marketable products have been developed.

Channel structure optimization. In 2020-2023, the share of distribution revenue continued to rise and direct management continued to decline. In 2023, each channel accounted for 78.2% of distribution, 17.77% of direct management, and 3.24% of direct e-commerce respectively. Regarding distribution channels, the company optimized the dealer structure in order to enhance customer service quality and improve dealer profitability. For direct management channels, the company focuses on improving profitability through product restructuring and precise cost control.

Expense rate control has achieved remarkable results. The company has strengthened expense ratio control in recent years. The gross sales margin bottomed out in 2015 and entered an upward channel in 2016. In 2019, the gross sales margin increased by 1.98 pct, the gross sales margin increased by 1.63 pct, and the gross sales margin increased by 6.86 pcts to 15.44% in 2020. The gross sales margin stabilized in the 14%-16% range in 2021-2023.

Human-efficiency and ROE are superior to peers. The company's main profit indicators in 2020-2023 were superior to peers. Among them, gross profit margin and sales expenses ratio were higher than peers; management expense ratio was lower than that of peers; net interest rate and ROE after deduction were also superior to peers; per capita income generation and profit generation were also significantly higher than those of peers.

Profit forecasting and valuation. We expect the company's EPS for 24-26 to be 0.89/0.94/1 yuan respectively. The relevant comparable company's PE in 24 years is 13-16 times, giving the company 15-17 times PE in 24 years, corresponding to a reasonable value range of 13.35-15.13 yuan, and for the first time coverage, a “superior to the market” rating.

Increased risk. Increased competition, poor market expansion, material price fluctuations, etc.