According to the Futubull News APP, Soochow Securities released research reports stating that as of early 2024, the cost and channel dividends of the consumer sector have been more pronounced, with most companies benefiting from cost reduction, leading to a significant improvement in net margin. Among them, in Q3, demand for frozen foods was weak and competition intensified, with the leading company showing better resilience; both the channel and category of leisure snacks have bright spots, leading growth in all sub-segments. Current changes in residents' consumption habits, downstream channels undergoing synchronous transformation, emergence of more efficient channels causing some impact on traditional channels, during this period, companies actively embracing new channels also enjoy the dividends of high growth of emerging channels.

The main viewpoints of Soochow Securities are as follows:

Frozen foods: Demand is weak and competition intensifies, with the leading company showing better resilience.

Q3 consumption generally under pressure, downstream dining industry demand remains weak, and price competition intensifies, with pressure transferring to the midstream dining supply chain track, leading dining head revenue and profit performance under pressure, but still showing resilience. Anjoy, although its overall revenue slowed down in Q2 and Q3, was mainly affected by the subsidiary crawfish business, while its main business continued to grow.

1) Revenue end: Anjoy Foods mainly caters to small business clients, with revenue trends this year closely matching those of dining and social retail data, maintaining single-digit growth. Large business enterprise growth is slowing down, coupled with the impact of a high base last year, Qianwei Central Kitchen and Ligao are under certain pressure from the large business end, and the demand from both their small business ends has not shown significant improvement. Sanquan Food mainly targets individual customers, with a continuous decline this year, besides weak demand, the recovery of traffic in supermarkets is not evident.

2) Profit end: Core businesses affected by intensified competition, increased expense allocation, Anjoy Foods, Qianwei Central Kitchen, and Sanquan Food all saw a decrease in net margin attributable to the parent company on a month-on-month and year-on-year basis. Ligao Food made strategic adjustments resulting in improvements both on a month-on-month and year-on-year basis under a low base.

Leisure snacks: both channels and categories have bright spots, leading growth in all sub-sectors.

On the one hand, the channel dividend is still continuing, with the snack convenience store channel + content e-commerce still being the fastest growing channels. On the other hand, companies with R&D capabilities are driving revenue growth through large single-item sales (such as Yanker Shop Food's quail eggs and konjac products, Jinzai's quail eggs, Youyou's boneless duck feet, etc.). Overall, most snack companies have seen an increase in their net margin attributable to shareholders in 2024 Q3 compared to the same period last year; Yanker Shop Food's net margin attributable to shareholders year-on-year decline is mainly due to the high base of last year's net margin, especially considering the lower tax rate in the same period last year.

1) Revenue: Three Squirrels, Yanker Shop Food's revenue growth rate in 2024 Q3 remains above 20%, Wan Chen Group is experiencing explosive growth, Youyou Food achieved close to 30% revenue growth year-on-year in Q3 due to the volume of new products; Jinzai Food and Ganyuan Foods' revenue growth rates year-on-year are also above 10%; Yanker Shop Food has improved compared to Q2, achieving positive year-on-year growth; Bestore Co.,Ltd. is still in a period of global strategy adjustment.

2) Profit: Cost dividend is evident, overall profit levels are rising. Since 2024, most raw materials such as oil costs have remained low in the snack industry; high-cost raw materials from last year, such as dried anchovies, quail eggs, sunflower seeds, and chicken feet, have fallen from their high levels.

Pan-dining chain format: must-have is better than optional, focusing on improving the efficiency of single stores.

The pan-dining chain format in this article mainly refers to chain marinated snack, chain table marinated dishes, chain breakfast, etc., also facing the pressure of soft demand and intensified price competition, but there are differences based on different category attributes, with optional categories performing better than mandatory categories. Currently, the strategies of listed companies in the chain format are mainly focused on improving the quality of single stores, slowing down the pace of store expansion in the short term. Most companies have achieved a year-on-year increase in net margin attributable to shareholders in 2024 Q4.

1) Revenue: Babibi mainly sells breakfast, experiencing some pressure but stronger than the optional attributes of leisure marinated snacks, slightly declining; Ziyan Food mainly focuses on table marinated dishes, with a single-digit decline in revenue year-on-year, and Juewei Food, with the main attribute of leisure snacks, experienced a double-digit decline in revenue year-on-year.

2) Profit: Duck by-product costs have fallen from their high levels, while raw material prices overall, such as Chicago SRW wheat, chicken, remain low.

Investment advice:

1) In the short term, looking at 2024Q4 and 2025Q1, more attention needs to be paid to the sales situation during the Spring Festival peak season, combined with the base situation of last year and recent marginal catalysts. Three Squirrels Inc. (300783.SZ) did not have a high base for the cargo festival last year, and has accelerated offline layout since the beginning of this year.

2) In the medium term, looking at 2025-2026, the bank believes that channel transformation will continue, recommending companies capable of actively embracing new channels, such as Yanker Shop Food (002847.SZ), Three Squirrels Inc. (300783.SZ), and paying close attention to Wancheng Group (300972.SZ). In addition, after experiencing soft demand, cost fluctuations, and industry price competition in recent years, leading companies are relatively more resistant. With the gradual recovery of demand and steady increase in industry concentration in some sectors, the leading companies' industry position and competitive advantages are expected to become more prominent. Bullish on Anjoy Foods Group (603345.SH).

Risk reminder: Risks include consumption recovery falling short of expectations, intensified industry competition, diminishing cost advantages, and food safety risks.