Summary of So Good (SOWG) 2025 Conference Call Company Overview - So Good (SOWG) has been operational for six years, initially focusing on freeze drying technology before entering the consumer packaged goods (CPG) market with freeze dried fruits, vegetables, and candy [6][7] - The company has sold approximately $24.4 million in revenue and 4.4 million units over the past year, with products available in nearly 17,000 retail locations [7] Industry Insights - The freeze dried candy market is experiencing significant growth, with an estimated annual growth rate of 8.5%, outpacing the overall candy market growth of 4% [15][16] - Major competitors like Hershey's and Mars have entered the freeze dried candy space, validating its market potential [11][16] - The candy category has been stagnant, and the introduction of freeze dried candy has revitalized interest among retailers and consumers [12] Competitive Positioning - So Good remains the number one independent freeze dried candy brand despite competitive pressures from larger CPG brands [7][11] - The company differentiates itself through manufacturing expertise, custom-built freeze dryers, and a broad product mix that includes sweet, sour, chocolate, and ice cream options [8][11][22] - So Good holds a 30-34% market share among independent brands, with four of the top ten freeze dried candy items [15][18] Financial Performance - The company reported net revenues of $1.9 million for the second quarter, down from $15.7 million the previous year, with a margin decline to negative 7% [33][34] - Overhead costs and underutilized capacity in freeze dryers have negatively impacted margins, but management expects improvements as sales recover [34][35][37] - The company has successfully reduced debt, with interest expenses decreasing from $1.3 million to $100,000 year-over-year [38][39] Future Outlook - So Good is focused on rebuilding relationships with retailers and expanding its product offerings, including private label baby snacks and freeze dried meat products [27][29] - The company anticipates a resurgence in sales and market share recovery over the next two to three quarters [30][29] - Management is optimistic about returning to positive EBITDA within the next year, supported by existing infrastructure and capacity [42][38] Key Challenges - The company faced significant competitive pressure from larger brands, leading to a decline in market share and revenues [29][49] - The need to stabilize operations and manage overhead costs effectively remains a priority [34][35] Additional Insights - The company has entered the hardware space, indicating diversification in its product offerings [25] - So Good's freeze dried products have a long shelf life, reducing concerns about inventory obsolescence [45]

Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected stock price increase of over 15% relative to the industry index in the next six months [3][20]. Core Views - The company is acquiring a leading domestic freeze-dried food manufacturer, which is expected to create a second growth curve and enhance its position in the health food market [1][2][11]. - The acquisition is projected to significantly improve the company's financial performance, with expected revenue growth and profitability in the coming years [11]. Financial Summary - **Revenue Forecast**: The company anticipates revenues of 1,921 million RMB in 2023, decreasing to 1,739 million RMB in 2024, and then increasing to 1,959 million RMB in 2025, with a growth rate of 12.6% [1][11]. - **Net Profit**: The net profit is expected to rise from 71 million RMB in 2023 to 88 million RMB in 2025, reflecting a year-on-year growth of 118.4% [1][11]. - **Return on Equity (ROE)**: The ROE is projected to improve from 2.4% in 2023 to 3.2% in 2025 [1][11]. - **Earnings Per Share (EPS)**: The EPS is forecasted to increase from 0.13 RMB in 2023 to 0.16 RMB in 2025 [1][11]. - **Price-to-Earnings (P/E) Ratio**: The P/E ratio is expected to decrease from 113.7 in 2023 to 91.1 in 2025 [1][11]. Acquisition Details - The company plans to acquire 51% of the shares of Fujian Lixing Food Co., Ltd. for 49,470,000 RMB, which will make Lixing a subsidiary and included in the consolidated financial statements [1][2]. - The acquired company has committed to achieving a net profit of no less than 75 million RMB, 89 million RMB, and 100 million RMB for the years 2025 to 2027, respectively [2][11]. Market Position and Growth Potential - The freeze-dried food market is projected to grow significantly, with the global market expected to reach 5.2 billion USD by 2030, and the Chinese market anticipated to grow to 8.8 billion RMB by 2030 [12]. - The company is well-positioned to benefit from trends such as the aging population and single-person households, with innovative products targeting health-conscious consumers [10][11].

Core Viewpoint - Delisi has signed a strategic cooperation agreement with Haifusheng and Xinsanhe to enhance collaboration in product supply, market expansion, technology synergy, and the development of freeze-dried pet food, aiming to leverage each other's strengths for mutual growth [1][2]. Group 1: Strategic Cooperation - The cooperation will focus on product supply and procurement, market expansion, technology collaboration, and the development of freeze-dried pet food [1]. - Delisi aims to utilize this partnership to enhance production efficiency, upgrade its product matrix, and expand market boundaries, particularly in the leisure food sector [1][2]. Group 2: Market Potential - The freeze-dried food market is growing, with China's leisure food industry market size increasing from 410 billion yuan in 2010 to 1,165.4 billion yuan in 2022, and projected to reach 1,237.8 billion yuan by 2027 [2]. - Delisi's collaboration is expected to enrich its product system and leverage its expertise in meat processing to gain a competitive edge in the leisure food market [2]. Group 3: Supply Chain and Production - Delisi has a slaughtering capacity of 3 million heads annually and a prepared food capacity of 180,000 tons, which will be prioritized for supply to its partners [3]. - The "dual-priority" supply chain model will stabilize order demand, reduce production costs, and enhance product quality through long-term cooperation [3]. Group 4: Technological Advancements - The partnership will allow Delisi to enhance its product offerings by integrating advanced freeze-drying technology, leading to innovative and differentiated products [3]. - Both parties will establish a communication mechanism for technology and business exchanges, sharing expertise in deep processing, freeze-drying, and food safety management [3]. Group 5: Sales and Market Penetration - Delisi will benefit from Haifusheng's strong online sales performance and mature operational experience, which will help expand its online market presence and brand influence [4]. - The collaboration will also explore the development of freeze-dried pet food, targeting the growing pet food market, which is expected to grow from 15.7 billion yuan in 2012 to 158.5 billion yuan by 2024, with a compound annual growth rate of 21.2% [4].

Group 1 - The core viewpoint of the article is that Delisi Foods has signed a strategic cooperation agreement with two companies, aiming to enhance collaboration in product supply, market expansion, and technology synergy, particularly in the freeze-dried pet food sector [1] - The agreement is expected to leverage the strengths of both parties, creating a synergistic effect that promotes resource sharing and mutual benefits [1] - Advanced freeze-drying technology is anticipated to inject new vitality into the company's development, enhancing the richness and innovation of its product matrix [1] Group 2 - The collaboration will focus on optimizing product structure to improve risk resistance and deepen business layout [1] - The partnership aims to enhance brand effect through the development of leisure foods and convenient health foods [1]