Summary of Wanchen Group Conference Call Company Overview - **Company**: Wanchen Group - **Industry**: Retail, specifically in the discount supermarket and new consumption sectors Key Points and Arguments 1. **Store Expansion**: Wanchen Group is rapidly expanding its store count, expected to approach 20,000 by the end of 2025, with new store sizes increasing to 200 square meters and introducing new product categories such as frozen goods, baked foods, toys, and daily chemical products to cater to young women and mothers [2][3][4] 2. **Profitability and Efficiency**: The company has improved profit margins and operational efficiency through collaborations with suppliers and private label customization, employing a tiered pricing strategy to enhance market competitiveness [2][4][6] 3. **Franchisee Feedback**: Franchisees generally recognize the new store model, although the payback period has extended from 1.5 years to 2-2.5 years. Despite this, the model remains competitive compared to other formats, and franchisees are willing to cooperate with headquarters for expansion [2][7] 4. **Financial Performance**: In Q1, the gross margin increased by 1% year-on-year, with a net profit margin of 3.8% after excluding share-based payment expenses, significantly higher than the previous year. The company expects to maintain a high level of performance in Q2 and the second half of the year [2][9] 5. **Market Positioning**: Wanchen Group and Mingming Hen Mang are likely to form a duopoly, with a challenge to reach 20,000 stores by year-end and potentially 50,000 stores next year, enhancing their bargaining power with consumers and suppliers [2][9] 6. **New Consumption Trends**: The company has successfully transitioned to a new consumption model, particularly in the snack wholesale business, with over 14,000 stores and annual revenue exceeding 30 billion yuan by the end of 2024 [3][11] 7. **Product Strategy**: The new store model focuses on selected categories and partnerships with leading brands to provide better value products, aligning with consumer trends for value [5][11] 8. **Future Outlook**: The company is expected to continue its steady expansion and optimize its product structure to enhance same-store sales growth, despite a slight decline in same-store sales growth due to rapid expansion [8] 9. **Competitive Landscape**: The discount supermarket sector is performing well, with stable selection strategies and standardized store formats. The competition with traditional supermarkets is expected to intensify, but the company is well-positioned to maintain profitability [9][10] Additional Important Insights - **Stock Performance**: Wanchen Group's stock has increased tenfold, and while market sentiment is high, it is advised not to chase prices. Current holders are encouraged to maintain their positions until year-end, with a projected profit of 900 million yuan and a valuation of approximately 30 times earnings [5][12] - **Supply Chain Management**: The company's advantages in supply chain management are expected to further solidify its market position and improve profitability [8]

Summary of Key Points from Conference Call Records Industry Overview - **Snack Retail Industry**: The snack retail sector showed strong performance in Q1, but single-store revenue declined due to the Spring Festival. The pace of new store openings accelerated in April and May, particularly in new markets like Yunnan and Guangdong. Future single-store revenue is expected to remain stable, with room for operational improvements such as SKU replacement and display optimization [1][3]. - **Frozen Food Sector**: Demand in the restaurant segment has not significantly improved, with market concerns arising from the alcohol ban. However, entering a low base period may lead to sequential improvements through new channels and products. Companies like Lihai Foods reported double-digit growth in order shipments in April and May, primarily from new customers in the Sam's Club and restaurant channels [1][6]. - **Ready-to-Drink Beverage Sector**: The fundamentals are strong, with companies like Guming, Chabaidao, and Mixue Ice City reporting double-digit same-store sales growth. The increase in delivery sales has led to a decline in profit margins, but absolute profit amounts continue to rise, and enthusiasm among franchisees for opening new stores is increasing [1][13]. Company-Specific Insights - **Lihai Foods**: Orders in April and May maintained double-digit growth, with a focus on new product launches and expanding restaurant channel customers. The company expects a revenue growth of approximately 15% for the year, with profits slightly better than revenue [1][9]. - **Weizhi Xiang**: The company plans to implement an equity incentive program in 2025, targeting a 20% revenue growth. After a decline in Q1, there was a slight improvement in April and May, with expectations for significant growth in the second half of the year driven by partnerships with Sam's Club, expansion into group meal services, and opening franchise stores in lower-tier towns [1][10]. - **Kang Shifu**: The company experienced slight growth in January and February, but sales declined in March due to price increases. Overall revenue is expected to slightly decrease in the first half of the year, but profit growth will significantly outpace revenue growth due to raw material price declines and efficiency improvements [1][15]. - **Yanjing Beer**: The company continued to show good growth from January to May, with U8 maintaining rapid growth and accounting for over 23% of total sales. The company is focusing on product upgrades and cost savings, which are expected to enhance profit margins [1][27][28]. - **Wan Zhou International**: The core business is expected to grow year-on-year in Q2, benefiting from favorable US pork prices and high profit margins in the meat products segment. The company anticipates a dividend payout ratio of about 50%, with a projected dividend yield of around 6% [1][24]. Market Trends and Recommendations - **Investment Opportunities**: The snack sector is currently experiencing high market sentiment, with recommendations for leading companies like Yanjin Puzhi and Youyou Foods due to their strong fundamentals and growth potential. Second-tier companies like Ximai and Jin Zai are also worth attention [2]. - **Frozen Food Sector**: Companies with low valuations are recommended for bottom-fishing and tracking, particularly Lihai Foods, which is expected to see improved profitability with new product launches [6]. - **Ready-to-Drink Beverage Sector**: Companies like Guming and Mixue Ice City are recommended due to their leading positions and significant expansion potential across the country [13][14]. - **Overall Market Sentiment**: The overall sentiment in the snack retail and beverage sectors remains positive, with expectations for continued growth driven by new product launches and market expansions [1][2][3].

Core Insights - The article discusses the transformation in the consumer industry, highlighting the shift from "channel-driven" to "emotion-driven" purchasing behavior, particularly in the context of new consumption trends [1][6][10] Group 1: New vs. Old Consumption - New consumption relies more on product strength, while old consumption is heavily dependent on channel strength [5][11] - New consumption encompasses categories like beauty care, trendy toys, and bulk snacks, along with certain companies from traditional and internet sectors [5][11] - The emergence of new consumption is a result of both changing consumer demands and rapid evolution in communication and sales channels [6][10] Group 2: Investment Framework - The core of consumer goods investment lies in brand power, which is defined as the combination of product and channel strength [2][5] - Companies with strong brand power typically exhibit higher net profit margins and faster turnover rates, contributing to high return on equity (ROE) [2] - Investment should focus on smaller companies that are in the process of building brand power, as this phase often correlates with the highest growth potential [2] Group 3: Changes in Consumer Behavior - The evolution of communication media has shifted consumer roles from passive recipients to active seekers of products that suit their preferences [8][9] - The rise of e-commerce has transformed sales channels, allowing consumers to directly access desired products without relying on local retailers [9][10] - New consumption products are characterized by distinct heterogeneity, appealing to specific audiences who appreciate their uniqueness [9][11] Group 4: Future Trends - The investment in new consumption is fundamentally a contest of aesthetic appreciation and understanding of lifestyle [11] - The beauty care industry is seen as a leading indicator for new consumption investment, with its marketing strategies and product approaches likely influencing other sectors in the future [11]

Company Overview - Wanchen Group, the parent company of Haoxianglai snack chain, has seen its stock price rise from 10 yuan to nearly 200 yuan, marking a significant increase [2][4] - The company operates 15,000 Haoxianglai stores and is projected to achieve revenue of 32.33 billion yuan and a net profit of 294 million yuan in 2024, with a net profit margin of approximately 0.9% [2][6] - As of June 7, Wanchen Group's stock closed at 184.34 yuan per share, with a total market capitalization of 33.18 billion yuan [2] Financial Performance - In 2024, Wanchen Group's total revenue reached 32.33 billion yuan, a year-on-year increase of 247.86%, and net profit of 294 million yuan, marking a turnaround from losses [6][12] - The snack retail segment generated 31.79 billion yuan in revenue, reflecting a year-on-year growth of 262.94% [7] - The company's first-quarter performance in 2023 showed a total revenue of 10.82 billion yuan, up 124.02%, and a net profit of 215 million yuan, a staggering increase of 3344.13% [15] Market Comparison - Compared to snack giants like Weilong, Three Squirrels, and Qiaqia Foods, which have net profit margins of 17.1%, 3.8%, and 11.9% respectively, Wanchen Group's net profit margin is significantly lower [2][15] - Wanchen Group's price-to-earnings (P/E) ratio stands at 38.61, which is comparable to Weilong's 32.24, while Three Squirrels and Qiaqia Foods have P/E ratios of 11.74 and 38.75 respectively [9][10] Industry Challenges - The snack retail industry is facing challenges such as declining store turnover rates, indicating a shift from rapid growth to a phase requiring refined operations [3][25] - The low-margin, high-turnover business model of snack retail demands high operational efficiency and cost control [21][23] - The competitive landscape has intensified, making it more challenging for franchisees to achieve profitability, with many reporting difficulties in covering fixed costs [22][23] Future Outlook - Despite current challenges, the snack retail sector is believed to have growth potential of 3 to 4 times its current market size [24] - Industry experts suggest that enhancing product quality and variety, as well as transitioning from snack stores to discount supermarkets, could be key strategies for future development [26][27]

Core Viewpoint - The snack retail industry, particularly the bulk snack stores, continues to thrive despite a wave of store closures, with significant revenue growth reported by leading companies in the sector [3][5][24]. Group 1: Industry Trends - The bulk snack industry is experiencing a "violent rise," with major players like Mingming Hen Mang and Wancheng Group achieving nearly 200% compound annual growth rate in revenue from 2022 to 2024 [3][5]. - In the first quarter of this year, 1,094 snack stores closed, while 1,400 new stores opened, indicating a dynamic and competitive market [5][24]. - The average annual revenue for successful snack stores can reach 6 million, with some owners reportedly making their first million [3][10]. Group 2: Business Model and Consumer Behavior - The business model of bulk snack stores relies heavily on low pricing and high SKU variety, with many stores offering private label products that do not carry brand premiums [10][11]. - The strategy of offering low prices is supported by economies of scale, allowing larger brands to negotiate better prices with suppliers [10][11]. - High customer retention is evident, with Mingming Hen Mang reporting 16 billion transactions in 2024 and a repurchase rate of 75% [10][11]. Group 3: Challenges and Competition - The market is becoming increasingly saturated, with reports of aggressive competition leading to price wars among stores [18][20]. - Franchisees face pressure from brand headquarters to lower prices and increase product variety, which can lead to diminishing returns for individual store owners [20][22]. - The rapid expansion of stores in close proximity has resulted in a zero-sum game, where one store's gain is another's loss, leading to significant revenue declines for many [18][20]. Group 4: Location and Market Dynamics - The success of snack stores is often linked to their location, with rural areas showing stronger consumer demand compared to urban settings, where competition and costs are higher [16][24]. - Store owners have reported that poor location choices can lead to significant financial losses, emphasizing the importance of market research before opening a new store [16][24]. - The trend of opening stores in lower-income areas is seen as a strategy to capture a more engaged customer base, as these consumers are less likely to shop online [16][24].

Core Viewpoint - The snack retail industry, particularly the bulk snack stores, continues to thrive despite challenges, with significant growth in revenue and new store openings, indicating a strong market demand and potential investment opportunities [4][5][6]. Group 1: Industry Growth and Trends - The bulk snack industry has seen a compound annual growth rate of nearly 200% from 2022 to 2024, with major players like Mingming Hen Mang and Wancheng Group achieving substantial revenue increases [4]. - In the first quarter of this year, while 1,094 snack stores closed, 1,400 new stores opened, showcasing a net positive growth in the sector [5]. - The average annual revenue for successful snack stores can reach up to 6 million, with some owners reportedly making their first million through this business model [4][11]. Group 2: Business Model and Consumer Behavior - The business model of bulk snack stores relies heavily on low pricing and high SKU variety, with many stores offering private label products that attract price-sensitive consumers [12][13]. - The average transaction volume for major players in the industry is significant, with Mingming Hen Mang recording 1.6 billion transactions in 2024 and a high repurchase rate of 75% [16]. - The strategy of offering mini versions of popular snacks allows consumers to try various flavors without the risk of waste, further driving sales [14]. Group 3: Challenges and Market Dynamics - Despite the apparent profitability, many store owners face challenges such as high operational costs, difficulty in hiring staff, and intense competition leading to price wars [18][20][32]. - The saturation of the market is evident, with reports of multiple stores opening in close proximity, leading to reduced sales for existing stores [28][37]. - The shift in consumer spending patterns, particularly in urban areas, has made it crucial for snack retailers to adapt their strategies to target lower-income regions where demand remains strong [22][25].

Company Overview - Mingming Hen Mang is a leading player in China's snack retail industry, formed by the merger of "Snack Hen Mang" and "Zhao Yiming Snacks" [1][12] - As of the end of 2024, the company operates 14,394 stores across 28 provinces, with 58% of its stores located in county towns and townships, and has over 120 million members [1][13] - The company achieved a revenue of 39.344 billion yuan in 2024, with a compound annual growth rate (CAGR) of 203% from 2022 to 2024, and a gross merchandise volume (GMV) of 55.5 billion yuan [1][15] Industry Insights - The retail scale of China's leisure food and beverage market has grown from 2.86 trillion yuan in 2019 to 3.74 trillion yuan in 2024, with a CAGR of 5.5% [1][25] - The share of the snack retail channel has increased from 8% in 2019 to 11% in 2024, making it one of the fastest-growing segments [1][29] Competitive Advantages - The company has an efficient store expansion strategy, adding 7,809 new stores in 2024, with an average annual GMV of 5.29 million yuan per store [2][39] - Digital supply chain capabilities have reduced logistics costs to 1.7%, and inventory turnover days have improved to 11.6 days [2][6] - The franchise system is robust, with 794 supervisors covering 14,000 stores, and a low customer concentration risk, with the top five customers accounting for only 2.5% of revenue [2][6] Future Growth Drivers - Market share is expected to increase as the company and its competitor, Wancheng Group, collectively operate over 14,000 stores, capturing nearly 75% of the market [2][6] - Upgrades to the store model, including the introduction of fresh food and daily necessities, are anticipated to enhance revenue per store [2][6] - Continued improvements in supply chain bargaining power and cost optimization are expected to further enhance gross and net profit margins [2][6] Financial Performance - The company reported a net profit of 834 million yuan in 2024, with a CAGR of 241% from 2022 to 2024, outpacing revenue growth [1][15] - The gross margin improved from 7.45% in 2022 to 7.62% in 2024, contributing to an adjusted net margin of 2.32% [1][15]

Core Viewpoint - The snack retail industry, particularly the bulk snack stores, continues to thrive despite a wave of store closures, with significant revenue growth reported by leading companies in the sector [3][5][6]. Group 1: Industry Growth and Trends - The bulk snack industry is experiencing a "violent rise," with major players like Mingming Hen Mang and Wancheng Group achieving nearly 200% compound annual growth rate in revenue from 2022 to 2024 [3][5]. - In 2022, Mingming Hen Mang reported a profit of 800 million, a year-on-year increase of 284% [3]. - Despite a "transfer wave" in the industry, where many snack stores are closing, new openings are outpacing closures, with 1,400 new stores launched compared to 1,094 closures in the first quarter of this year [5]. Group 2: Business Model and Consumer Behavior - The business model of bulk snack stores relies heavily on low pricing and high SKU variety, attracting consumers with competitive pricing compared to convenience stores [11][12]. - The average transaction volume for Mingming Hen Mang is projected to reach 1.6 billion transactions in 2024, with a high repurchase rate of 75% [12]. - The presence of private label products, which make up a significant portion of inventory, allows stores to maintain low prices and adapt quickly to consumer preferences [11][12]. Group 3: Challenges and Market Dynamics - The industry faces challenges such as high employee turnover and difficulties in hiring competent staff, which can impact store operations [14][16]. - The competitive landscape is intensifying, with many new stores opening in close proximity, leading to price wars and reduced profitability for existing stores [28][30]. - Franchisees are experiencing pressure from brand owners to lower prices and increase inventory diversity, which can strain their profitability [29][30]. Group 4: Market Segmentation and Location Strategy - The trend indicates a shift towards rural and lower-tier cities for snack store openings, where operational costs are lower and consumer spending remains robust [20][21]. - Urban locations, while initially attractive, may not yield the expected returns due to higher costs and lower disposable income among consumers [22][23]. - Successful franchisees are increasingly focusing on smaller towns and counties, where consumer behavior and spending patterns favor snack purchases [20][21].

Core Insights - The article discusses a significant shift in the Chinese consumer market, emphasizing that traditional beliefs about targeting core consumer groups in first and second-tier cities are being challenged by emerging brands that are gaining traction in lower-tier markets [2][5][15]. Group 1: New Consumption Trends - New retail companies, such as Miming Hen Mang and others, are achieving remarkable growth and performance, indicating a shift in consumer preferences and market dynamics [2][3]. - The success of these new brands, often founded by younger entrepreneurs, highlights a departure from traditional consumer behavior and brand loyalty [2][5]. - The article suggests that the so-called "new consumption" is not truly new but rather a reflection of outdated thinking among traditional brands and investors [6][11]. Group 2: Market Dynamics and Consumer Behavior - The rise of brands like Miming Hen Mang, which plans to submit IPO materials by April 2025, showcases the potential of lower-tier markets, with 58% of its 14,000 stores located in counties and towns [3][5]. - The article notes that consumer behavior is evolving, with younger generations prioritizing emotional value over traditional brand prestige, leading to a decline in loyalty to established brands [9][21]. - The shift in consumer preferences is evident in the growing demand for value-driven products, as consumers increasingly seek quality at lower prices, challenging the traditional brand and channel strategies [22][23]. Group 3: Future Trends in Consumption - The article identifies three key trends that will dominate the consumer market in the next decade: the empowerment of the silent majority, the rise of self-oriented consumption, and the pursuit of value for money [15][21][22]. - The Z generation is becoming a significant consumer force, with their preferences and spending habits diverging from those of previous generations, emphasizing personal interests and experiences [16][18]. - The article predicts that the focus on self-satisfaction and emotional fulfillment will reshape consumption patterns, moving away from social status-driven purchases [21][22].

Core Viewpoint - The company is experiencing strong operational performance with significant revenue and profit growth, and is well-positioned to expand its discount supermarket presence, leveraging its scale advantages in the snack retail sector [1][2]. Group 1: Financial Performance - In Q1, the company achieved a revenue of 10.821 billion yuan, representing a year-on-year increase of 124.02% [1] - The net profit attributable to shareholders was 215 million yuan, a staggering year-on-year increase of 3,344.13% [1] - The net profit from the snack retail business, after excluding share-based payment expenses, was 412 million yuan, with a net profit margin of 3.85%, up by 1.36 percentage points year-on-year [1] Group 2: Expansion and Market Position - Q2 and Q3 are expected to be peak seasons for store openings, indicating a potential acceleration in expansion [1] - The company has launched an employee stock incentive plan to enhance employee motivation, which may further support growth [1] - The number of discount supermarkets has been increasing since the end of last year, with both snack retail enterprises and regional brands transforming traditional supermarkets into discount formats [1] Group 3: Future Projections - The company is projected to maintain high revenue growth, with expected revenues of 55.132 billion, 67.039 billion, and 79.289 billion yuan for 2025-2027, reflecting year-on-year growth rates of 70.53%, 21.60%, and 18.27% respectively [2] - The net profit attributable to shareholders is expected to reach 734 million, 984 million, and 1.196 billion yuan for the same period, with year-on-year growth rates of 149.95%, 34.10%, and 21.61% respectively [2] - The company is anticipated to benefit from scale effects, leading to continuous improvement in profitability [2]