Report summary:

One-stop community chef officially joined the Wandian Club. The GUOQUAN was established in 2015 to provide consumers with ready-to-eat, quick-heat, ready-to-cook, and ready-to-serve ingredients. The store network expanded rapidly, reaching 10,307 stores in 2023, covering 29 provinces, autonomous regions and municipalities. Achieving revenue of 6.094 billion yuan and net profit of 0.24 billion yuan in 2023, it is a leading and rapidly growing home-cooked meal product brand in China.

Eating at home is gradually becoming a trend in the Chinese restaurant market. The home-dining market experienced strong growth in size, growing from 3248.2 billion yuan in 2018 to 5615.6 billion yuan in 2022, with a CAGR of 14.7%. During COVID-19, due to restaurant closures, risk of infection, and epidemic control measures, people began to eat more at home, causing the food at home market to surge in 2020-2022, and consumer spending habits continued after the pandemic. In terms of retail sales, home-cooked meal products are expected to be the fastest-growing segment of the eat at home market.

Taking Japanese fast food as an example, there is plenty of room for growth in the industry. In 2023, the size of the prepared food market in China was 361.6 billion yuan, and it maintained rapid growth at an annual growth rate of 20%-35%. In the future, with consumption upgrades and the development of cold chain logistics, the prepared food market will accelerate at the same time towards the BC side, and is expected to reach 749 billion yuan in 2026. Looking back at the development of frozen food in Japan, the two ends of BC showed a separation-driven trend.

Compared to Japan, at a macro level, China is similar to Japan in the 1970s to 1980s. At the consumer level, the Chinese and Japanese quick-frozen food markets are growing at a similar rate, and there is room for at least 1 times increase in frozen food consumption per capita.

China's leading and rapidly developing home-cooked meal product brand has met people's need to eat at home. In terms of brands, as a leading one-stop home-eating meal product brand, it ranks first among retailers in mainland China with a market share of about 3%. In terms of products, it is tasty, convenient, inexpensive, and has a wide variety of food products for eating at home, improving the efficiency of preparing meals in the kitchen for eating at home. On the channel, we have a network of 10,000 retail stores, establish close online and offline connections, and create community stores that bring convenience to life.

Looking at the future development of the pot industry from the Kobe Bussan business model. Kobe Bussan pioneered a hard discount model for differentiated product selection, starting scale growth with frozen foods, adding freshness to shopping with high-margin imported foods, and achieving low prices and unique supply. At the same time, through supply chain collaboration, food factories were acquired during the downturn in the Japanese manufacturing industry, promoted differentiated products based on their own production capacity, effectively avoided upward pressure on raw materials, and achieved daily low prices. The GUOQUAN has a similar model and supply chain integration strategy. Similar to the early stages of Kobe Bussan's development, there is plenty of room for future growth.

Profit forecast: As the company expands and deepens offline store sales channels, innovates and diversifies new sales channels, and strengthens R&D and upstream supply chain capabilities, consolidates the core competitive advantage of products, improves supply chain digitalization, promotes membership system construction, enhances operational efficiency and revenue, continues to increase investment in brand building and marketing, and enhances consumer reach and stickiness, stores and revenue are expected to grow steadily. First coverage, EPS is expected to be 0.08, 0.10, and 0.12 yuan in 2024-2026, and the corresponding PE is 20X, 17X, and 14X, respectively. Give it a “buy” rating.

Risk warning: Upstream and downstream product control/franchisee operation/warehousing logistics/expansion falls short of expectations