Prefabricated food products have increased by 350% in two years, the quick-frozen hot pot material industry ranks first, and the consumer bull opens the second growth curve!

At the end of every year, prefabricated food will start a wave of speculation, and the prefabricated food sector has been repeatedly strengthened recently, and related companies Huifa Food, Youyou Food, Gaishi Food, Xujiahui, and Yike Food have risen one after another.

Why are pre-made dishes so popular?

Many people may think that the consumer market of prefabricated dishes is the C-end, and the consumer group is young people at home. However, in fact, 8% of the prefabricated food consumption market is concentrated in the B-end market such as hotels, chain fast food, small and medium-sized restaurants, etc.

The reason why catering companies choose pre-made dishes is also very simple, that is, the cost is low. Some institutional studies show that the gross profit margin of prefabricated dishes is generally higher than that of pure fresh commodities by more than 10 points, and in terms of labor costs and energy costs, restaurants that use prefabricated dishes also have more advantages than traditional restaurants, which can release a lot of profit margins.

Higher profits bring higher market demand. Attracted by the prosperity of the industry, in recent years, many enterprises have begun to lay out the prefabricated vegetable track.

Today, we will analyze a strong overlord of prefabricated dishes - Yasui Foods.

Anjing Food's main business is quick-frozen food, with a rich product line, covering quick-frozen noodles and rice products, quick-frozen hot pot ingredients and quick-frozen prefabricated dishes.

In the quick-frozen noodle rice industry, the market is basically monopolized by Sanquan, Synear and Wan Chai Wharf, with a total market share of 64%.

Therefore, Yasui Food did not choose to compete with the giants on the front of the quick-frozen noodles and rice, avoid conventional quick-frozen foods such as dumplings, wontons, and glutinous rice balls, and use products such as roasted wheat and finger cakes to compete differently, while putting its core business on quick-frozen hot pot ingredients. The main "Anjing" brand fish tofu, fish roe buns, crab steaks and other quick-frozen surimi products and peeing meatballs, kissing intestines, Xia mi dumplings and other quick-frozen meat products.

The quick-frozen hot pot ingredient market is relatively fragmented, with the top five players accounting for only 20% of the market share. Anjing Foods ranks first in the industry with a market share of 9%.

At the same time, Yasui Foods seized the dividend of "home consumption" of the epidemic and began to vigorously deploy the "prefabricated dishes" business in 2021 to create a second growth curve.

It can also be seen from the revenue composition of Anjing Foods that the quick-frozen hot pot material business, including surimi products and meat products, is still the basic plate of Anjing Foods, accounting for half of the total revenue in 2022. In the first three quarters of this year, the revenue accounted for 30.27%, which has become the business with the largest contribution to Anjing Food's revenue.

In terms of performance, Anjing Food can be said to have fully enjoyed the dividend of "home consumption", and it has maintained rapid growth in the three years of the epidemic. From 2019 to 2022, Anjing Food's revenue increased from 5.267 billion to 12.183 billion, with a compound annual growth rate of 32%, and its net profit increased from 373 million to 1.101 billion, with a compound annual growth rate of 43%.

Even after the epidemic, in the first three quarters of this year, Anjing Food's performance was still outstanding, and its net profit of 1.132 billion yuan has exceeded the level of last year. Among them, the explosive growth of prefabricated dishes is definitely a great contribution.

Yasui Food's prefabricated food business is, simply put, "self-produced + OEM + mergers and acquisitions".

In 2020, it acquired "Mr. Frozen Products" for OEM production, in 2021, it will increase the production capacity of prefabricated dishes, and in 2022, it will establish "Anjing Kitchen" to produce its own prefabricated dishes.

Under a series of actions, Anjing Food's prefabricated food business is booming, with a revenue of 673 million in 2020 and 3.024 billion in 2022, with a business scale of nearly 350% in two years, and the revenue of 3.109 billion in the first three quarters of this year has also exceeded that of last year.

In the future, with the expansion of chain restaurants and takeaway markets, the penetration rate of prefabricated dishes in the B-end will continue to increase. Correspondingly, Anjing Food's prefabricated food business will continue to maintain rapid growth, and its future growth is likely to surpass that of the quick-frozen hot pot business.

However, due to the relatively low gross profit margin of the prefabricated food business, its rapid growth has pulled down the company's overall gross profit margin from the data, which is not too worrying.

Even with the decline in gross profit margin, Yasui Food's net profit margin will still increase in 2022, which reflects the great resilience of the company's operation.

Judging from the data, the gross profit margin declined, but the net profit margin increased, because the expense side was well controlled. In 2022, while the scale of Anjing Food's performance expanded, the sales expense rate and management expense rate decreased to varying degrees, which shows the improvement of the company's operation and management capabilities and efficiency.

Here I have to mention the strategy of "selling real estate" and "researching the production area" of Anjing Food, which is not to sell real estate, but to produce at the place of sale, and to carry out taste research and development at the place of production.

Due to the small transportation radius of quick-frozen food, the taste barrier is high. Anjing Foods has established production bases in 8 provinces across the country, and each production base is responsible for the research and development of new products in a certain category. As of 2022, the eight production bases have a designed production capacity of 944,000 tons. By building a cross-regional supply chain, Yasui Foods has greatly reduced procurement costs and logistics costs.

From 2020 to 2022, Yasui Foods' logistics expense ratio continued to decline, from 2.4% to 2%. And compared with Haixin Food, a company in the same industry, Anjing Food's logistics cost rate is only one-third of it.

In addition, judging from the current regional distribution of income, the main sales area of Anjing Food is mainly in East China, but the sales proportion in East China is declining year by year. In 2020, there was still half of the country, and it fell to 42.98% in the first three quarters of this year. It's not that East China is no longer good, it's that other regions are growing more rapidly.

In the future, with the construction of Anjing Food's national production capacity, the income between regions will be more balanced, that is, there is still a lot of room for growth in other regions. (Not only pre-made dishes, but also quick-frozen hot pot ingredients, we just mentioned that the quick-frozen hot pot ingredients market is relatively fragmented, which means that there are still enough market cakes to grab.) ）

In addition, there is a question about Yasui Food, which is also a concern for investors. That's ROE declining. In general, for consumer goods companies, the analysis process inevitably focuses on ROE changes.

Yasui Foods' ROE has been declining since 2020, from 18.79% to 13.14% in 2022. Why is it going down, and will it continue to decline in the future?

I don't think there will be a sustained decline in the future. ROE = Net Profit Margin * Total Asset Turnover Ratio * Equity Multiplier. If we decompose ROE into three parts, we can see that the net profit margin is increasing, and the reason for the decline in ROE is the decline in the total asset turnover ratio and equity multiplier.

The reason for the decline in total asset turnover and equity multiplier is due to the expansion of the asset scale of Yasui Foods. As we mentioned just now, Anjing Foods has made some acquisitions in order to cut into the prefabricated vegetable track, and in order to expand production capacity, Anjing Foods will also raise a large amount of money in 2022, a full 6.275 billion. As a result, the asset scale of Anjing Foods has expanded rapidly, and the total assets of 7.096 billion in 2020 have more than doubled to 16.194 billion in 2022.

With the expansion of assets and the repayment of some bank loans, the asset-liability ratio of Anjing Foods has been declining, and it will only be 26.52 in 2022, and the corresponding financial leverage, that is, the equity multiplier, will naturally decline. In other words, the decline in ROE of Yasui Foods is due to the improvement of the financial structure.

In the future, the equity multiplier will basically remain stable, and with the expansion of operating income and the improvement of operating efficiency, the total asset turnover ratio will continue to increase. Therefore, I think that the ROE of Yasui Foods will not continue to decline, but will turn upward, and even Yasui Foods can increase its ROE by properly amplifying the equity multiplier.

Finally, to sum up. In the prefabricated vegetable track, Anjing Food is still very growing, and the rapid release of performance has also opened the second growth curve for Anjing Food. With the consolidation of the basic business, the improvement of new business and the continuous improvement of operating efficiency, the performance of Yasui Foods will continue to improve.