Lyon upgraded ZHOU HEI YA (01458) rating to "outperform the market", focusing on product + efficiency to open up new profit opportunities.

Recently, international investment bank Credit Lyonnais released a research report, upgrading ZHOU HEI YA (01458) to "High Conviction Outperform" rating, with a target price raised from 1.70 Hong Kong dollars to 2.30 Hong Kong dollars, corresponding to a forecast PE of 20 times in 2026, close to its historical average level of 20.5 times since listing. Credit Lyonnais pointed out that the core product advantages of ZHOU HEI YA and improvement in profit quality will support long-term growth, making the current valuation attractive. Rating Upgrade: From Scale Expansion to Efficiency Priority, Product Strength as Core Focus Credit Lyonnais emphasized that the market has previously focused too much on the speed of ZHOU HEI YA store closures, while overlooking its core competitive advantage product strength. In the second half of 2024, the total number of ZHOU HEI YA stores was optimized to 3031, with a significant improvement in store efficiency by focusing on core commercial districts in first and second-tier cities as well as high potential areas in lower-tier cities. Financial reports show that in 2024, the company's gross profit margin increased by 4.4 percentage points year-on-year to 56.8%, mainly due to precise cost control during the downturn in raw material prices and product structure optimization. It is expected that the gross profit margin will be maintained at a high level of 55.5% in 2025, with operational leverage effects gradually becoming apparent. With store sales recovery and channel efficiency improvement, Credit Lyonnais expects ZHOU HEI YA's revenue to achieve a 6.2% growth by 2026, and with store sales recovery and operational leverage effects, net profit will increase by 17%. Credit Lyonnais believes that the net profit compound annual growth rate (CAGR) of ZHOU HEI YA from 2024 to 2027 will reach 42%, and the net profit is expected to reach 281 million yuan by 2027. Focus on Core, Reshape Growth Logic In 2025, ZHOU HEI YA plans to take a series of strategic transformation measures in store adjustments, product focus, brand upgrade, and channel combination. On one hand, they will focus on high potential area stores, strengthen their core advantage in duck products, and plan to enhance product attractiveness through brand upgrades. On the other hand, they will continue to expand their diversification channels such as supermarkets, convenience stores, new retail, and snack discounts, creating a "catering + retail" dual channel combination that uniquely advantages in the industry. Credit Lyonnais also emphasized that ZHOU HEI YA's moat lies in its unique flavor, high quality control standards, and improved decision-making efficiency after the founder's return. The current "focus" strategy has shown effectiveness, and in the long run, the dual drive of product strength and efficiency is expected to reshape the salted flavor competition barriers. This rating upgrade reflects the international market's recognition of ZHOU HEI YA's shift from "scale-driven" to "value-driven". Under the trend of rational consumption, ZHOU HEI YA is expected to consolidate its foundation through product strength, release profit space through efficiency improvement, with a clear long-term growth logic and investment value that can withstand cycles.