Guosheng Securities: Snack industry prosperity continues, product-driven growth.

Guosheng Securities released a research report stating that the net profit margin of the snack sector in 2024 is expected to decrease by -0.3% to 6.6% year-on-year. Amid the backdrop of channel structure adjustments, the sector is expected to remain relatively stable. The net profit margin for 24Q4 and 25Q1 is expected to decrease by -1.2% and -2.5% respectively, mainly due to rising costs and increased expenses from some companies to support market expansion, leading to short-term profit pressures. However, in the long term, improvements in production efficiency and management, as well as the strengthening of flagship products, are expected to enhance long-term profitability trends. Since the accelerated expansion of snack stores in the second half of 2021 and the rapid growth of Douyin, the growth of the snack industry has been largely driven by channel reforms. Looking ahead to 2025, retail channels are still undergoing rapid transformation. Key points from Guosheng Securities: - Review of Operations in 2024 and 25Q1: Seasonal disruptions during the Spring Festival quarter, highlighting structural growth opportunities. - Revenue for the snack sector in 2024 reached 548.9 billion yuan, a year-on-year growth of +6.9%, with companies actively embracing new channels and continuing to demonstrate excellent growth momentum. In 25Q1, the snack sector's revenue totaled 144.2 billion yuan, a year-on-year decrease of -5.3%, mainly due to seasonal disruptions caused by the Spring Festival, with companies focused on gift-giving during the festival season and having a higher proportion of New Year goods sales being more pressured. - The net profit attributable to shareholders for the snack sector in 2024 is 36.3 billion yuan, a year-on-year growth of +3.1%. Despite steady annual profit growth, in 24Q4 and 25Q1, net profit attributable to shareholders decreased by -15.5% and -33.6% respectively, mainly due to cost increases and the limited scale effect of the Spring Festival in Q1. For the investment recommendations provided by Guosheng Securities, they suggest focusing on companies with clear growth drivers, strong performance in channel expansions, and the ability to create a second product curve. Additionally, companies with undervalued and growth-transformation potential are also recommended as short-term investments. Risks highlighted by Guosheng Securities include unexpected delays in product promotions, significant increases in raw material costs, and intensifying industry competition.