Investment Rating - The report gives a "Buy" rating for the company, indicating a positive outlook for future performance [8]. Core Insights - The company is a leader in the Chinese snack food chain industry, focusing on meat and nut products, and is undergoing strategic transformation in channel structure, regional layout, cost control, and new business models [1][3]. - The company has shifted from a direct sales model to a dual strategy of "direct sales + franchising," with franchise stores surpassing direct stores for the first time in 2024, accounting for 51.9% of total stores [1][2]. - The company has partnered with Tencent to leverage AI technology for enhancing offline consumer experiences, which is expected to improve operational efficiency and reduce R&D costs [3]. Summary by Sections Company Overview - Founded in 1999, the company has over 3,000 stores across major cities in China and a total membership of 94.77 million [17]. - The company offers a wide range of products, including nuts, meat snacks, and baked goods, with over 1,500 items [17][26]. Financial Performance - Revenue has shown volatility, with a decline of 9.25% in 2023 and 15.25% in 2024, reaching 3.37 billion yuan [9][30]. - The company reported a net profit of 57.05 million yuan in 2023, but is projected to incur losses in 2024, with a net loss of 75.27 million yuan [9][30]. - The gross margin has been under pressure, decreasing to 41% in 2024, influenced by increased competition and a higher proportion of lower-margin franchise operations [58]. Regional Analysis - The East China region is the primary revenue source, contributing 86.94% of total revenue in 2024, with a gross margin of 40.76% [30][34]. - The company is expanding its presence outside the East China region, with significant growth potential observed in areas like Anhui [35]. Business Model Transition - The company is transitioning from a direct sales model to a franchise model, with franchise revenue growing from 4.81% in 2019 to 23.67% in 2024, reflecting a five-year CAGR of 31.99% [1][53]. - The direct sales revenue in 2024 was 20.20 billion yuan, accounting for 62.95% of total revenue, but showing a decline of 21.39% [53]. Product Categories - The company’s product mix includes 13 core categories, with meat products and seafood being the largest segment, accounting for 29.94% of revenue in 2024 [43][49]. - The company has launched over 600 new products in 2024, focusing on high-potential items to enhance its product offerings [26]. Cost Management - The company has successfully reduced sales expenses by approximately 25% in 2024 compared to 2022, achieving a reduction of 325 million yuan [2][64]. - Despite the increase in operating costs due to the shift towards franchising, the company is implementing measures to control expenses and improve profitability [58][65].

Core Viewpoint - The company, Laiyifen, reported a disappointing performance in the first half of 2025, with revenue growth but a significant net loss, indicating a situation of increasing revenue without increasing profit [2][4][5]. Revenue Performance - Laiyifen's revenue for the first half of 2025 reached 1.94 billion yuan, a year-on-year increase of 8.21% [4]. - The net profit turned negative at -50.68 million yuan, a shift from profit to loss compared to the previous year [4]. - The cash flow from operating activities decreased by 78.68% to 22.40 million yuan [4]. Cost and Profitability Issues - The company's gross margin fell to 32.61%, down 8.67 percentage points year-on-year, while the net margin was -2.27%, a decline of 3.00 percentage points [6]. - In Q2 2025, the gross margin further decreased to 30.21%, down 10.73 percentage points year-on-year [7]. Store Operations and Adjustments - As of June 30, 2025, the total number of stores decreased to 2,979, with a net reduction of 106 stores [8]. - The number of direct-operated stores fell by 90 to 1,395, while franchise stores decreased by 16 to 1,584 [8]. - Revenue from direct-operated stores dropped by 78.69% to 875 million yuan, while franchise store revenue increased by 78.71% to 722 million yuan [8]. Market Challenges and Competitive Landscape - The company faces intense competition from emerging snack retailers, which have adopted low-price strategies that appeal to consumers, particularly in lower-tier markets [5][11]. - The overall consumption environment remains challenging, impacting many physical stores, including those in the snack sector [5]. Strategic Transformation - Laiyifen is undergoing a strategic transformation, focusing on new business channels and product innovation to drive revenue growth [5][10]. - The company is also exploring new product categories, including beverages and prepared foods, to enhance its market presence [9][12]. Recommendations for Improvement - Analysts suggest that the company should enhance product development and innovation, optimize store operations, and strengthen online sales channels to improve profitability [12][13]. - There is a need for better cost control in the supply chain and a clearer brand positioning to differentiate from competitors [13].