Chacha Food Company Limited(002557) (002557)
Event: Recently, we tracked the company’s channels and updated our views as follows:
Driven by price increase and channel expansion, the company is expected to grow well in the second half of the year. (1) The price of sugar and sunflower seeds rose significantly this year. In order to smooth the cost pressure and sort out the channel price system, the company announced that the price of national sunflower increased by 8% – 18% in October; (2) the promotion model of nuts in community stores has achieved initial results, dealers have exchanged profits for quantity, and the product circulation speed has increased.
The price increase does not damage the terminal acceptance, and is expected to improve the performance elasticity of the company in 2022. According to the current research feedback, consumers are still willing to pay after the price increase through negotiation, We believe that the core reasons are: (1) Qiaqia is absolutely leading in the market share of bagged melon seeds, has a strong voice, has a high degree of cooperation with dealers, and the implementation of price increase is smooth; (2) the price of single bag of melon seeds is low, and the price increase range is difficult to be perceived by consumers. Refer to the price increase of the company in 2018 (mainly aiming at the price increase of 6% – 14.5% for red bag and original incense), the ex factory price of national sunflower in 2018-19 increased by 2% / 10% year-on-year, maintaining a gross profit of 35% under the condition of significant increase in sunflower seed cost in 2019. We judge that the performance elasticity of this price increase in 2022 may be higher than that in 2019, mainly because: (1) the price increase range is wider (including red bag and blue bag); (2) The current round of price increase will be fully implemented in November, and the benefit period can cover the whole year of next year, while the price increase in 2018 will be implemented from July to August; (3) the cost of sunflower seeds has shown a downward trend since June 2021.
Controllable inventory & dealers are fully motivated and have sufficient growth momentum. At present, the dealer’s inventory days are about 20 days, which is at a normal level. There is still room for pressing the inventory before the annual goods Festival. Dealers are fully encouraged to obtain cash rebate when the annual sales reach a certain threshold, and the nut business also provides considerable market cost support for the sales of large customers. At present, dealers have sufficient confidence, especially after the model of nut community store is verified in the second half of this year, the performance of the annual goods Festival is worth looking forward to.
Organizational change superimposed on intensive cultivation of channels to provide institutional support for category volume. On the one hand, in May this year, the company transformed the business division into a category center, created Guokui Iron Army and nut Iron Army, delegated power to bu units of each category, and further activated channel flexibility; On the other hand, the company’s perfect offline distribution system ensures the intensive cultivation of the channel. Key stores visit and track repeatedly on a weekly basis, which is expected to deepen the mastery of channel dynamic sales in the future and lay a good foundation for nuts as the second growth curve.
Profit forecast Valuation and rating: Based on comprehensive considerations: (1) the company’s terminal price increase has been initially recognized by the market, which is expected to improve the performance flexibility in 2022; (2) the company’s nut community store scene is gradually open, and it is expected to continue to attack cities and land under Qiaqia’s mature dealer management system. We maintain the net profit forecast of 906 / 1041 / 1210 million yuan for 21-23 years, and the current stock price corresponds to 30 / 26 / 23 times of PE for 21-23 years, which is maintained “Buy” rating.
Risk tip: the epidemic repeatedly affects the terminal demand and intensifies the nut competition.
