Incidents:

On July 23, Zhuwei Foods held a brand strategy upgrade conference in Changsha to announce the brand renewal and upgrade. At the press conference, it was officially announced that Fan Chengcheng will be the first global brand ambassador in the 19 years since the establishment of the brand.

Key points of investment:

Completely refreshed, and once again brilliant. At the press conference, Zhuwei Food officially announced its new brand symbol, brand slogan, brand IP image, and the first global brand spokesperson: 1) Brand slogan: Dare to be spicy, only be perfect. 2) Brand symbol: The “Absolute” logo has been upgraded to a super symbol with flames. The dancing flames are directly reminiscent of a hot taste experience. 3) Brand IP image: Based on the brand spirit of “if you dare to be spicy, you can only taste it”, Zhuwei has launched a new brand IP - Little Fire Duck. 4) Image spokesperson: Fan Chengcheng, the first global brand ambassador in 19 years since the brand was founded, also announced Fan Chengcheng's live broadcast video, brand TVC and other peripheral materials. At the same time, communication with young consumers was deepened. At the same time, Dexterous Duck Neck stores across the country were simultaneously refreshed, and Fan Chengcheng's exclusive packages will also be launched.

Hiring an ambassador for the first time, brand marketing has entered a new era. We believe that the marketing methods of the chain business are different in different periods: 1) During the introduction period and in the early stages of growth, store expansion is the best marketing method. As stores are revealed to be seen by more consumers, and consumers complete the see-and-buy action, the company side will see a sharp rise in volume and price at this point, that is, the number of stores will increase rapidly, and single store revenue will rise rapidly (brand influence increases, brand premiums rise in customer unit prices); 2) In the middle and late stages of growth and maturity, the store reveals that the increase in consumer awareness has reached a certain bottleneck, and enterprises will begin to increase the entry rate and purchase rate through various marketing methods, such as bus billboards, building advertisements, and ambassadors., that is, the number of stores is slow Growth, single store revenue is relatively stable. Exquisite Foods launched bus stop advertisements in '20, building advertisements in early '23, and hired a spokesperson for the first time this year, which also means that the company's brand marketing has entered a new era.

The double support of “spokesperson+Olympics” is expected to drive product sales growth. Consumers have always said “drink beer, eat duck necks and watch events,” and the company also has the practice of “big year of event marketing year”, that is, a simple incident can completely drive product sales, and there is no need for too much marketing support. On the eve of the Olympics this year, the company official announced a spokesperson and a series of marketing activities. We believe that in the context of weak consumption, it will effectively boost short-term company sales.

The company's growth point: 24 years of slow recovery, and the long-term logic is still strong.

—In the short term: the recovery in consumption is weak, and the competition may be catalyzed. In the first half of the year, the company was affected by the general consumption environment. The overall growth rate was affected to a certain extent, and single store revenue was also affected to a certain extent. Since Q3, the company has actively carried out marketing activities, hired new spokespersons, and with the support of the Olympics, we think revenue may grow well.

—Mid-term perspective: Seize the window and seek breakthroughs. Strategically, 24 years is defined as a year of adjustment, shifting from a horse-racing and local-style store opening strategy to intensive cultivation and improving individual stores to ensure the quality of life and profit level of franchisees.

Tactically, the company does not assess the task of opening stores throughout the year to ensure a steady increase in single store revenue. In the company's history, stores were also adjusted at the end of '13, adopting the strategy of “closing inefficiently and opening efficiently”. Single-store revenue growth reached a record high of 7.79% in '14, and the store adjustment strategy in '24. We are also looking forward to subsequent results.

—Long-term perspective: continue to build a “food ecosystem”. On the one hand, the company is continuously testing the waters by independently incubating new catering projects and new models, contributing new growth points to the company's main business. On the other hand, through investment and mergers and acquisitions, the company exports supply chain and management capabilities to the outside world, such as investing in Hefu noodles, happy pancakes, etc., and strives to become an accelerator for light and specialty restaurants in China.

Investment advice: We analyze from the three aspects of fundamentals, sentiment, and capital:

—Fundamentals: Since Q3, the company has actively carried out marketing activities, hired new spokespersons, and with the support of the Olympics, we think it may be reflected in sales; the company adjusted its stores in '24, and the company will usher in high-quality development in the future after store optimization.

— Emotional side: Spokesperson + Olympic catalyst, event-driven, which is expected to boost stock prices in the short term.

—Financial side: The company's dividend rate of 3.4% is at the upper level of the industry, which is in line with current investors' preferences for dividends. Furthermore, due to continuous foreign purchases recently, the valuation is expected to increase. According to Wind data, as of July 26, Land Stock Connect held 13.49 million shares of the company, accounting for 2.17% of the shares. Since July, capital has flowed in from North China for many days.

Profit forecast: We expect the company's 24-26 revenue to be 7.2 billion, 8 billion yuan, and 8.9 billion yuan, respectively, up -0.4%, 10.4% year-on-year, and net profit to mother of 0.65 billion, 0.78 billion, and 0.91 billion yuan, respectively, with year-on-year increases of 89%, 19%, and 18%. EPS is 1.05, 1.25, and 1.47 yuan respectively, and corresponding PE is 14X, 11.7X, and 10X, respectively. Covered for the first time, giving a “Buy-B” rating.

Risk warning: macroeconomic fluctuations are large; channel expansion falls short of expectations; industry competition intensifies; costs of raw materials etc. are rising rapidly; food safety issues, etc.