The volume of the snack sales business increased sharply, and the company's 24H1 reversed losses year-on-year

Driven by the number of mass snack stores and the optimization of the single store model, the company achieved operating income of 10.9 billion yuan, +392% over the same period, and achieved net profit of 0.93 million yuan to mother, reversing losses over the previous year. The company's plan to take back minority shareholders' shares shows its determination to expand and strengthen the mass snack business. We basically maintain the company's 24-26 profit forecast, referring to the average valuation value of a comparable company of 21.5XPE. Considering the company's outstanding size advantage, we gave the company 26 XPE for 24 years, corresponding to a target price of 27.82 yuan, and maintained a “gain” rating.

The volume of snacks sold increased sharply, and the company's 24H1 reversed losses year-on-year

Wanchen Group 24H1 achieved operating income of 10.9 billion yuan, +392% year-on-year, and realized net profit of 0.93 million yuan to mother, reversing losses over the previous year. Among them, the mass-selling snack business achieved operating income of 10.7 billion yuan, +448% over the same period; the edible fungus business accounted for a relatively small share, and revenue declined year-on-year due to the price of enoki mushrooms. We believe that the steady increase in the number of stores opened in the mass snack business and the optimization of the single store model were the main reasons for the company's high 24H1 revenue increase and net profit to mother to reverse the year-on-year loss. 1) Number of stores opened: The company's 24 H1 net increase in the number of stores was 1,912 and expanded steadily; 2) Single store model: 24Q1 and 24Q2 The net interest rates for mass-selling snacks after excluding equity incentive fees were 2.50% and 2.72%, respectively. Profit indicators improved quarterly, and the company's mass sales business was improving.

Accelerate the recovery of minority shareholders' shares, demonstrating determination to grow bigger and stronger

According to the 2024/8/15 announcement, the company plans to transfer 49% of Sun Company's shares in Nanjing Wanhao (I really want to come) with 0.294 billion yuan of its own capital. After the acquisition is completed, Wan Chen will directly and indirectly hold 75.5% of Nanjing Wanhao's shares. Combined with Nanjing Wanhao's 24Q1 net profit of 0.027 billion yuan, we estimate Wanhao's annualized net profit of about 1.0 to 0.12 billion yuan, corresponding to the acquisition valuation ratio of 5.0 to 6.0XPE. The company plans to take back minority shareholders' shares. On the one hand, it further enhances its control over Nanjing Wanhao and highlights the company's determination to expand and strengthen its snack sales business; on the other hand, it will help increase the company's net profit to the mother and open up market value space.

The target price is 27.82 yuan, maintaining the “gain” rating

Considering the positive single-store revenue of Wanchen Group's mass snack business, we raised our 24-26 revenue forecast.

We basically maintain the company's profit forecast for 2024/25/26. We expect the company to achieve net profit of 0.19, 0.359, and 0.535 billion yuan in 24-26, corresponding EPS of 1.07, 2.03, and 3.02 yuan. Referring to the average valuation value of comparable companies, we will give the company 26 XPE for 24 years, corresponding to a target price of 27.82 yuan, and maintain the “gain” rating.

Risk warning: Snack store expansion falls short of expectations, price war competition exceeds expectations, single-store model profits deteriorate, minority shareholders' share acquisition progress falls short of expectations, etc.