Incident Overview

The company announced its semi-annual results forecast. In the first half of the year, it is expected to achieve operating income of 10.8-11.2 billion yuan, +387-405% year on year; net profit to mother 0.8-1.2 million yuan, loss for the same period last year; net profit after deducting non-return to mother of 330 to -2.2 million yuan, a year-on-year reduction in losses.

Referring to the performance forecast, the company's mass sales business is expected to achieve revenue of 10.5-11 billion yuan in the first half of the year, of which Q2 is expected to achieve revenue of 5.8-6.3 billion yuan, a continuous increase over Q1; after excluding share payments, the net profit for the first half of the year is expected to be 0.27 billion yuan - 0.294 billion yuan, with a net interest rate of about 2.57%-2.67%, of which Q2 net interest rate is about 2.63%-2.80%, and the net interest rate of the mass-selling snack business continues month-on-month Steady improvement. Affected by market factors such as changes in the edible fungus market and changes in the relationship between supply and demand, the sales price of the company's main product, enoki mushrooms, dropped significantly year-on-year, and the business lost money.

Analytical judgment:

The mass sales business continued to accelerate month-on-month in 24Q2, and profitability continued to increase. Under the general environment of expanding domestic demand and boosting consumption, the scale of the company's mass-selling snacks business rapidly expanded. It has become a leading mass sales brand with a leading number of stores in many provinces and regions such as East China and North China. Brand potential, consumer loyalty, high-quality franchisee resources, and localized store planning and location experience have all been fully accumulated. Its “I want to buy brand snacks” has become a well-known chain brand in the country. In 2024, the company continued to accelerate the nationwide development and expansion of the mass snack business. The advantages continued to accumulate, and the number of stores increased dramatically. The mass sales business is expected to achieve revenue of 10.5-11 billion yuan in the first half of the year, exceeding the level of last year. Among them, the Q2 snack sales business is expected to achieve revenue of 5.8-6.3 billion yuan, and the scale of Q1's performance continues to increase.

On the profit side, after excluding share payments, the company's mass snack business is expected to achieve net profit of 0.27-0.294 billion yuan in the first half of the year, with a net interest rate of about 2.57-2.67%. Of these, the net profit for the second quarter is expected to be about 0.153-0.177 billion yuan, and the net interest rate is about 2.63-2.80%. The net interest rate of the snack sales business continues to increase steadily from month to month. We believe that thanks to the company's continuous development of its own supply chain advantages, warehousing and logistics advantages, brand building capabilities, refined organizational management advantages, and digital empowerment advantages, etc., the company's competitive advantage has been continuously enhanced and consolidated, the company's operating efficiency continues to improve, and profitability continues to increase.

Accelerate store opening and continue to enjoy the dividends of industry growth

According to the company's official website, the number of Wanchen's snack retail sector has exceeded 7,000 stores nationwide. We are optimistic that the company will continue to deepen the layout of snack sales, the growth path will be further clarified, and the number of its stores is expected to increase further. At the same time, the gross margin of the company's mass sales business is expected to increase steadily. At the same time, the marginal utility of investing in storage and marketing expenses will gradually increase. There is still room for optimization of the cost ratio, and the overall net interest rate is expected to still have a lot of room for improvement. In the medium to long term, we are optimistic that Wan Chen will use the advantages of listed companies' platforms to enjoy the double dividends of growing the snack market and increasing channel share, achieve scale expansion, and continue to enjoy the dividends of industry growth.

Investment advice

Referring to the latest performance forecast, we raised the company's 24-25 revenue forecast of 21.058/27.316 billion yuan to 24.352/33.369 billion yuan, adding a 26-year forecast of 37.173 billion yuan; adjusted the 24-25 EPS forecast of 0.98/2.34 yuan to 0.70/1.92 yuan, adding a 26-year forecast of 2.83 yuan; and corresponding to the closing price of 18.12 yuan on July 29, 2024 to 26/ 9/6 times, maintaining the accumulation rating.

Risk warning

The store opening process fell short of expectations, and industry competition intensified