Incident: The company released the 24H1 performance forecast. 24H1 is expected to achieve revenue of 10.8-11.2 billion yuan, of which the mass snack business revenue is 10.5-11 billion yuan and the mushroom business 0.2-0.3 billion yuan; looking at Q2 alone, the 24Q2 mass snack business is expected to achieve revenue of 5.8-6.3 billion yuan (compared to 24Q1 +23.5%-34.2%), 24Q2 mass snack business net interest rate (excluding equity payment fees) is 2.63% - 2.80% (month-on-month ratio 24q1+0.13-0.3pct).

Comment:

The mass-selling snack business continued to grow rapidly month-on-month, verifying the competitiveness of the mass-selling snack business model and the company's excellent operating ability. The market is concerned that the mass snack business is progressing less than expected due to store encryption and industry competition. In fact, the company's 24Q2 mass snack business revenue grew at an accelerated pace. Single stores are expected to grow month-on-month, and the business is still in a phase of rapid growth. As of 24H1, the company's monetary capital was 2.1 billion yuan (24Q1 was about 1.7 billion yuan), and the continuous increase in monetary capital from month to month indicates a steady cash flow contribution to the volume sales business.

The profit margin of the mass-selling snack business increased month-on-month, dispelling market concerns about industry competition affecting profitability. The market previously feared that industry competition (store opening subsidies, etc.) had led to an increase in the company's profitability falling short of expectations. The further increase in the profit margin of the 24Q2 mass sales business from month to month indicates the scale effect of the company's operating capacity and business format. Wan Chen currently leads the number of stores in East China and North China. Looking ahead, the company's profitability is expected to increase further due to scale effects.

24H1's apparent net profit and micro-profit is mainly due to the impact of equity incentive fee calculation and mushroom business (sales price of the main product, enoki mushroom, declined significantly year-on-year). The mushroom business is a cyclical industry. We believe that valuing the mushroom business and the mass-selling snack business directly based on apparent net profit would underestimate the value of the snack sales business.

Profit forecast and investment rating: Looking ahead, we expect the company's revenue from the mass snack sales business to be 25 billion yuan, the net profit of the mass snack business (excluding equity incentive costs) to be 0.7 billion yuan, and the mass snack business contributed 0.15-0.2 billion yuan to the mother's net profit (excluding equity incentive expenses) in 24 years. Previously, there were many stock price corrections, and the current market value implied that the current year's valuation was already at a low level. As a leading brand in the more efficient snack market, Wanchen Group is currently opening a single store and continues to deliver results. We expect the company's earnings per share to be 0.72, 1.63, and 2.23 yuan for 24-26, maintaining the company's “buy” rating.

Risk factors: Increased competition in regional markets, price wars in the industry, multi-brand operating capacity falls short of expectations, and food safety issues.