Introduction to this report:

As a leader in marinated chicken claws, Youyou Foods continues to enrich its marinated product matrix, the development of emerging channels is accelerating, nationalization is progressing steadily, changes on the marketing side can be expected, and performance growth is expected to exceed expectations.

Key points of investment:

Investment advice: First coverage, with an “increase in weight” rating. The company's 2024-2026 EPS is expected to be 0.36, 0.46, and 0.58 yuan, respectively, up 33%, 30%, and 26% year-on-year, respectively. Combining the two valuation methods of FCFF and PE, the company is given a target price of 13.4 yuan, corresponding to 29X PE in 2025.

New categories and channels are gaining strength, and the company's performance is expected to grow at an accelerated pace. The company's brand awareness is leading, and the emphasis on category and channel innovation has been further enhanced. On the product side, the company continues to enrich its halogenated product matrix. Phoenix claw products are picking up steadily, and Sam Channel's new products are clearly expanding; on the channel side, traditional distribution channels are gradually opening up regions and actively embracing membership-based supermarkets. It can be expected that channels such as Sam and Market Opener will deepen cooperation and expand sales, and the mass sales channel will gradually enter with differentiated products, and the broad development space is expected to contribute to the increase.

The company has an advantage as a leader in segmentation, and an increase in share can be expected. Currently, there are more than 600 domestic pickled pepper and chicken claw manufacturers. Youyou Foods currently has a market share of more than 20%, ranking in the leading position, with a sales scale of 1 billion. The second-tier enterprises have a revenue scale of about 0.1-0.2 billion, and there are also a large number of small family workshop-style enterprises. In the future, with the large-scale and standardized development of the industry, the market position of leading enterprises with high quality, well-known brands, wide channels, and large scale is expected to strengthen, and there is plenty of room for growth in leading market share.

The company's product and brand advantages are prominent, and channel marketing is expected to be strengthened. The company adheres to brand development and leading product quality, and strengthens product innovation around the advantages of the marinating process. The revenue share of non-chicken claw products continued to increase, exceeding 25% in 2023. The new 2024Q3 boneless duck paw product contributed 0.07 billion yuan to revenue from other products in the quarter of the order, a significant increase compared to 0.01 billion yuan in 2024H1, and can be expected to build a second growth curve with new categories. The company is expected to be more active on the channel side, introduce differentiated products into different channels, and try its best to maintain prices and profits.

Referring to snack companies such as Yanjin Shop, Jinzai Food, and Ganyuan Foods, after entering membership-based supermarkets and mass snack channels, there was no significant decline in the overall net interest rate center. At the same time, channel volume led to an increase in sales scale and flow rate, showing an upward trend in asset turnover. We believe Youyou Foods may be expected to replicate the above growth path.

Risk warning: fluctuating raw material prices, food safety risks, and increased industry competition.