Malatang is a 100 billion Chinese fast food category with large space and high degree of standardization, and its growth is relatively stable. Spicy hot is affordable, with sufficient flavor and sticky taste. According to frost Sullivan data, the Chinese market was about 133.6 billion yuan in 2021, accounting for 17.4% of Chinese fast food, and CAGR was 5.5% from 2016 to 2021 7%, slightly higher than the overall catering by 1.2pct. It is expected to reach RMB 19.3 billion by 2025e and CAGR 7.0% from 2019 to 2025e 1%, sinking the market and taking out are the structural growth points. The proportion of semi-finished products of spicy hot food ingredients is high, the preparation is simple, and it is easier to standardize. The chain rate in 2021 is 22.5%, about 5pct higher than that of catering as a whole. It is expected that 2025e is expected to increase to 26.0%, which is easier to produce large chain brands than most Chinese catering categories.
The leading brands adopt the "supply chain franchisee consumer (s2b2c)" mode, and the output supply chain and management ability can be copied quickly. At present, the number of stores of Yang Guofu and Zhang Liang exceeds 5000, with obvious first mover advantage. Leading brands export brand influence, large-scale supply chain and management ability, and quickly expand stores by taking advantage of the local advantages of franchisees and their subjective initiative to be responsible for their own profits and losses, mainly earning money from supply chain (food material sales) and franchise fees. The total investment of leading brand franchise restaurants in the early stage is about 100000 ~ 150000 yuan, the theoretical restaurant level profit margin is about 15% ~ 30%, and the profitability of single store model is good. The leading brands Yang Guofu and Zhang Liang have the same pace of opening stores, with more than 5000 stores and mainly franchising. In addition to the top two, the number of stores in the industry exceeds 500, with a total of 6 brands, and the number of sister seeking stores of the third brand is about 740, which is far from the top two.
Yang Guofu: Malatang is the first brand, with sticky soup bottom, brand awareness and supply chain layout as competitive advantages. By the end of 3q21, Yang Guofu had a total of 5783 restaurants, all of which are franchised except for 3 self operated ones, distributed in 31 provinces of China and 6 overseas countries. There are 582 / 2322 / 2594 first / second / third tier and below in China respectively. According to the commodity transaction volume and the number of stores, it is the first brand in China's Chinese fast food market (0.7%). The company plans to open at least 1000 franchised restaurants in China every year from 2022 to 2024. The company's exclusive soup base formula is an important support for the brand's long life cycle; After 19 years of precipitation, the brand has high national popularity and can continue to attract franchisees; Sichuan's self built factory produces its own core base and seasoning. It purchases from a third party due to its scale advantages, with strong bargaining power and perfect supply chain layout. In the first three quarters of 2021, the company's revenue was 1.16 billion yuan, the net profit attributable to the parent company was 200 million yuan, the net interest rate was 16.9%, an increase of 1.9 PCT compared with 2019, and its profitability was more stable than that of its peers in the epidemic. The raised funds will be mainly used for store expansion, upgrading production facilities, upgrading information systems, developing retail business, etc.
Investment advice
Malatang is a 100 billion level catering track, with a high degree of standardization and spicy and sticky taste, which makes it easier to cultivate large-scale chain brands. Brands mainly earn money from the supply chain and have low operating leverage. Under the impact of the epidemic, their profitability is still relatively stable. It is suggested to pay attention to Yang Guofu Malatang, the industry leader to be listed in Hong Kong stocks. In addition, the quick-frozen food represented by balls is an important ingredient in the Malatang supply chain. It is suggested to pay attention to Fu Jian Anjoy Foods Co.Ltd(603345) and so on.
Risk tips
The speed of brand net store expansion was lower than expected. Grassroots research shows that some brands in the industry have double highs in opening and closing stores. If the net expansion speed is lower than expected and the liquidity of franchisees is too high, it will affect the growth of brand revenue.
The development of brand retail business is less than expected. Malatang brands mostly adopt franchise mode, lack of pure TOC business experience, and the competition of retail products of some brands with new layout has become more intense.
Manage risk. Franchisees are mainly small franchisees, with great differences in individual business ability. The third-party management company may also fail to implement the management mode of the brand party.
Repeated epidemic risk, food safety risk.
