Core Viewpoint - The recent financial struggles of Juewei Foods (603517.SH) highlight significant issues in cost control, strategic planning, and brand management, exacerbated by a recent health certificate forgery scandal that has raised concerns about its franchise model [3][6]. Financial Performance - In 2024, Juewei Foods reported a revenue of 6.257 billion yuan, a decrease of 13.84% year-on-year, while net profit fell to 227 million yuan, down 34.04% [3]. - In Q1 2025, the downward trend continued, with revenue and net profit declining by 11.47% and 27.29% respectively [3]. - Sales expenses surged by 23.31% in 2024, reaching 667 million yuan, and further increased by 8.93% in Q1 2025 to 146 million yuan, without effectively boosting performance [4]. Debt and Liquidity Concerns - As of Q1 2025, Juewei Foods had total current liabilities of 1.732 billion yuan, while cash reserves stood at only 905 million yuan, indicating potential liquidity issues [4]. Franchise Model Challenges - The rapid expansion through franchising has led to management challenges, including quality control and compliance issues among franchisees, highlighted by the recent health certificate forgery incident [5][6]. - The company has faced criticism for its inadequate oversight of franchise operations, which has negatively impacted brand reputation [6]. Expansion and Capacity Utilization - Juewei Foods has budgeted 1.56 billion yuan for significant construction projects aimed at expanding processing capacity, despite facing operational pressures [7][9]. - Several processing projects have not achieved expected returns due to underutilization of capacity, raising questions about the feasibility of the expansion plans [9]. Market Dynamics and Brand Management - The evolving market demands higher standards for product quality, service, and brand image, making mere capacity expansion insufficient for maintaining competitive advantage [10].

Investment Rating - The report maintains a "Recommended" rating for the company, with a target price of 19.6 yuan [2][8]. Core Views - The company experienced continued pressure in 2024, with total revenue of 6.257 billion yuan, a year-on-year decrease of 13.84%, and a net profit attributable to shareholders of 227 million yuan, down 34.04% year-on-year. The fourth quarter of 2024 saw a revenue drop of 23.8% year-on-year, resulting in a net loss of 211 million yuan [2][4]. - In the first quarter of 2025, total revenue was 1.501 billion yuan, a decrease of 11.47% year-on-year, with a net profit of 120 million yuan, down 27.29% year-on-year [2][4]. - The company is actively exploring changes to improve its situation, focusing on brand upgrades, digital transformation, and lean operations. It aims to stabilize store numbers and improve same-store sales [2][8]. Financial Summary - **2024 Financial Performance**: - Total revenue: 6,257 million yuan - Year-on-year growth rate: -13.8% - Net profit: 227 million yuan - Year-on-year growth rate: -34.0% - Gross margin: 30.5% [4][9] - **2025 Financial Projections**: - Total revenue expected: 5,877 million yuan - Year-on-year growth rate: -6.1% - Net profit expected: 501 million yuan - Year-on-year growth rate: 120.4% - EPS forecast: 0.83 yuan [4][9] - **Valuation Ratios**: - PE ratio for 2025: 20 times - PE ratio for 2026: 16 times - PE ratio for 2027: 14 times [4][9] Market Performance - The company's stock price has shown significant volatility, with a current price of 16.12 yuan, reflecting a challenging market environment [4][8]. Operational Insights - The company faced challenges with store closures, estimating around 2,000 net closures in 2024, impacting revenue and same-store sales negatively [2][8]. - The company is focusing on improving operational efficiency and exploring digital applications in collaboration with Tencent to enhance its business model [2][8].