Key points of investment

Spicy bar leader, set sail with a fresh start

Founder Liu Weiping started a spicy strip business in Luohe, Henan in 1999. In 2001, Weilong Tasty was founded. Its flagship product, large and small gluten, was introduced one after another, and has successively launched products such as chisuyaki, konjac refreshment, and fresh kelp, actively laying out modern channels and exploring emerging channels. Although revenue and profit fluctuate slightly, they have all entered an upward cycle.

New consumption+new channels nurture structural opportunities

According to F&S forecasts, the overall CAGR of China's spicy snack food/snack industry in the next three years will be about 9.6%/6.8%, respectively. The popularity of spicy snacks is higher than that of the industry as a whole: (1) Categories: spicy casual vegetable products, seasoned noodle products, and spicy casual dried bean products are the three fastest growing subcategories. The CAGR for the next three years is expected to be 17.2%/8.9%/8.0%, respectively. (2) Channel division: The share of snack sales and e-commerce channels increased rapidly, reaching 9.4%/17.4% respectively in 2023. New product iteration+intensive channel cultivation, I am optimistic that Weilong's market share will increase and consolidate its leading position.

Good at accurate insight, standing on the cusp of winning

(1) Product: As a pioneer in the spicy strip industry, the company adheres to the “multiple categories, big single product” strategy. The growth of large single gluten is steady, and second-curve konjac is successfully incubated, driving vegetable products to achieve high double-digit growth. The product layout is complete and the iteration is smooth. (2) Channel: The company actively embraces every round of industry changes, moving from traditional channels to modern channels and emerging channels such as snack sales and e-commerce, and gradually lays out overseas markets. Build a first-level distribution model+introduce individual distributors+combine sales support and auxiliary sales, manage carefully, and dig deeper into incremental growth. (3) Marketing: Weilong always “stands with” young people, accurately grasps every round of publicity windows, and establishes a high-quality image of safety and health.

New product release+channel intensive cultivation, giving a “buy” rating

We expect the company's 2024-2026 revenue to be 5.935/6.939/7.806 billion yuan, respectively, with year-on-year growth rates of 21.83%/16.91%/12.50%, and net profit to mother of 1.106/1.313/1.505 billion yuan, respectively. The year-on-year growth rates are 25.62%/18.76%/14.60%, and EPS 0.47/0.56/0.64 yuan/share, respectively. In view of the company's second growth curve, konjac soup is still in the release period. New product reserves are abundant, product iteration is smooth, and coverage for the first time has been given a “buy” rating.

Risk warning: risk of product quality and food safety, risk of rising raw material prices, risk of increased market competition