JONJEE(SH:600872) Changjiang Securities·2024-06-10 05:31Investment Rating - The report initiates coverage with a "Buy" rating for Zhongju Gaoxin [4][5] Core Viewpoints - Zhongju Gaoxin is a leading company in the condiment industry, primarily focusing on soy sauce, with significant market presence in Southern China and expanding nationwide. The company has undergone governance changes and is expected to enter a new operational phase in 2024 following the implementation of its first equity incentive plan and the strategic planning for its core brand, Meiwai Xian [4][12][13]. Company Overview - Zhongju Gaoxin specializes in the condiment sector, with key brands including Chubang and Meiwai Xian. The company has faced stagnation in revenue growth over the past three years, with a reported revenue of 5.139 billion yuan in 2023, a decrease of 3.8% year-on-year. However, the net profit attributable to shareholders was 1.697 billion yuan, showing a significant recovery compared to the average of the past five years [4][13][18]. Product and Market Dynamics - Soy sauce is the company's largest product category, accounting for 58.92% of total revenue, with sales reaching 512,100 tons in 2023. The compound annual growth rate (CAGR) for soy sauce sales from 2018 to 2023 was 4.97%. Despite a decline in average price per ton due to increased competition, there is potential for price recovery as consumer income rises and dining trends improve [4][12][18][32]. Strategic Changes and Management - The company has implemented comprehensive operational reforms, including a new board and management team, which are expected to enhance efficiency and drive long-term growth. An equity incentive plan has been proposed to motivate key personnel, aiming for a doubling of revenue over three years [5][25][26]. Industry Trends - The condiment industry is experiencing a shift towards health-oriented products, with increasing consumer awareness driving demand for healthier options. The market for high-quality soy sauce is expanding, particularly in the premium segment, which has seen a CAGR of 18% from 2015 to 2020 [28][29][32]. The transition from B2B to B2C sales channels is also notable, with a growing emphasis on diverse purchasing methods in the consumer market [35][40].