Let go of the franchise model, empower franchisees in all directions, and improve the profitability of stores. In 2017, the company launched the "Wanjia Lighting" plan to accelerate the expansion of offline stores from East China to nationalization. By the end of 2019, the company had a total of 2792 (2429 direct stores and 363 franchise stores). There are more than 100 large and medium-sized cities across the country, with direct operating income of 3.06 billion yuan and franchise income of 190 million yuan in 19 years. This year, the company will speed up the expansion of franchise stores. On the one hand, it will go hand in hand with single-store franchise, regional franchise and strategic franchise; on the other hand, it will provide incentives and preferential policies for franchisees from all aspects such as brand, marketing, service, management, logistics supply chain, organization and IT system, and encourage high-quality franchisees to open more stores and good stores; at the same time, steadily promote the direct business model and strengthen brand image and loyalty.

Launch paid member business, turn to user thinking, and speed up the construction of new retail. In order to adapt to the industry environment and changes in consumer demand, the company actively adjusted its strategic thinking and accelerated the construction of online channels, with an online scale of 520 million yuan in 19 years. In April this year, the company launched the paid member business, and Black Gold members can enjoy special discounts, special services and other rights to invigorate the stock of high-quality customers, which means that the company has begun to shift from flow thinking to user thinking. from the growth thinking of rapid customer acquisition to the retention thinking of in-depth operation customers, in order to maximize the value of users. At present, the company's online channels cover third-party platforms, Laiyi APP, Laiyi takeout platform and other omni-directional systems, of which Laifei APP has a special technical team operation, with all-channel member carrier, takeout, group purchase, community and other functions, while offline drainage, strengthen online and offline linkage.

Integration of upstream and downstream industrial chains, performance release is imminent. 1. Offline direct operation and joining will go hand in hand to accelerate the process of nationalization. The company's direct business model has obvious competitive advantages in the industry. Since 18 years, the company has accelerated the development of franchise stores, focusing on North and South China. With the improvement of brand influence, the pace of store opening is expected to accelerate year by year; with the deepening of store empowerment, the profitability of individual stores is also expected to improve. 2. Power online channel and strengthen online and offline linkage. As the company strengthens its online marketing, the company's average sales increased rapidly last month since 17-19, second only to three squirrels. At present, the online channel continues to strengthen, the performance during the epidemic is outstanding, and it is expected to increase significantly in 20 years. 3. With the integration of the upstream and downstream supply chains, the gross margin level needs to be further improved. The company's product matrix is constantly enriched to meet diversified needs, continue to cultivate large single products, and the product structure continues to upgrade. The gross profit margin of the company's products is in the forefront of the industry, mainly due to the sales model and strong control over the upstream.

Profit forecast and investment advice. After the adjustment of business thinking, the company is gradually on the right track, with the improvement of brand awareness, the acceleration of offline channel expansion, and the gradual emergence of scale effects. it is expected that the net profit level of the company will rise to a new level after 21 years. It is estimated that the revenue for 20-22 years will be 55.3,68.3 and 8.32 billion yuan respectively, the net profit will be 1.3,2.2 and 340 million yuan respectively, and the EPS will be 0.39,0.66 and 1.01 respectively. Taking into account the company's compound growth rate of more than 8.32 billion in the next three years and the valuation of similar companies, the 21-year PE will be 31 times and the corresponding target price for 21 years will be 20.50 yuan, maintaining the "recommended" rating.

Risk tips: direct store rents and labor costs have risen sharply, the progress of joining has been lower than expected, online growth has slowed down, raw material prices have risen, food safety issues, and so on.