Northeast: GUOQUAN (02517) is rated as "buy", aiming to break through the 10,000 store mark with its one-stop community central kitchen platform.

Northeast released a research report, covering GUOQUAN (02517) for the first time, giving it a "buy" rating, and expecting EPS of 0.08, 0.10, and 0.12 yuan for 2024-2026. With the company expanding and deepening offline store sales channels, innovating diverse new sales channels, enhancing R&D and upstream supply chain capabilities, consolidating product core competitive advantages, improving supply chain digitization, promoting membership system construction, improving operational efficiency and revenue, continuously increasing brand building and marketing investment, enhancing consumer reach and stickiness, it is expected that store and revenue will steadily increase. Northeast's main points are as follows: - One-stop community central kitchen, officially joining the Million Stores Club. GUOQUAN was established in 2015, providing consumers with ready-to-eat, ready-to-heat, ready-to-cook, and ready-to-pair ingredients. The store network is rapidly expanding, reaching 10,307 stores in 2023, covering 29 provinces, autonomous regions, and municipalities. In 2023, it achieved a revenue of 6.094 billion yuan and a net profit of 240 million yuan, making it a leading and rapidly growing brand of home-cooked meal products in China. Eating at home is gradually becoming a trend in the Chinese catering market. The market size of home-cooked meal products has experienced strong growth, increasing from 3.2482 trillion yuan in 2018 to 5.6156 trillion yuan in 2022, with a compounded annual growth rate of 14.7%. During the epidemic, people started eating more at home, leading to a surge in the home-cooked meal market from 2020-2022, with consumer habits continuing post-pandemic. In terms of retail sales, home-cooked meal products are expected to be the fastest-growing segment in the home-cooked meal market. Taking Japanese fast food as a reference, there is significant industry incremental space. In 2023, the size of the Chinese prefabricated vegetable market was 361.6 billion yuan, maintaining a high growth rate of 20%-35% per year, and is expected to reach 749 billion yuan by 2026. Looking back at the development of frozen food in Japan, there is a separation-driven trend at the BC ends. Compared to Japan, at the macro level, China is similar to Japan in the 1970s-1980s, with similar growth rates in the frozen food market, and there is at least a 1-fold increase in per capita frozen food consumption. GUOQUAN, as a leading and rapidly developing brand of home-cooked meal products, meets people's needs for eating at home. In terms of brand, as the leading one-stop brand of home-cooked meal products, it ranks first among mainland Chinese retailers with a market share of approximately 3%. In terms of products, delicious, convenient, affordable, and diverse home-cooked meal products improve kitchen meal prep efficiency at home. In terms of channels, with a network of thousands of retail stores, establishing close online and offline connections, creating convenient community stores that bring convenience to life mirroring the Kobe Trading business model, GUOQUAN's future development is promising. Kobe Trading pioneered a differentiated selection of products and hard discount model, launching scale growth with frozen foods, supplemented by high-margin imported foods to add freshness and uniqueness to shopping, achieving low-cost and unique supply. By leveraging supply chain coordination, acquiring food factories during Japan's manufacturing decline period, using self-owned production capacity to promote differentiated products, effectively avoiding upward pressure on raw materials, and achieving daily low-cost operations. GUOQUAN has a similar model and supply chain integration strategy, similar to Kobe Trading in its early development, with broad growth opportunities in the future. Risk Warning: Risks of product control/franchisee operation/warehousing logistics/unexpected expansion risks on the upstream and downstream.