高盛-A股-短期業(yè)績沖擊和估值之辯

_

31October2022|8:55PMHKT

ChinaFrozenFoods

Sectorinitiationfeedback:Shorttermearningsriskand

valuationdebate

CathyChen,CFA

+852-2978-6621|kaiqi.chen@

GoldmanSachs(Asia)L.L.C.

MichelleCheng

+852-2978-6631|

michelle.cheng@

GoldmanSachs(Asia)L.L.C.

LunaSun

PostourinitiationoftheChinaFrozenFoodsindustryand5stocksonOct18th,

2022,investorswespoketobroadlyagreewiththestructuralgrowthoutlookofthe

sectordrivenbyfoodserviceindustrializationandourinvestmentframeworktofocus

onhighgrowthsegments,2Bchannelplayers,andleaderswithprovenef?ciency

andscaleadvantages.Among?vestocksweinitiatedon,Anjoyistheconsensus

buyforlong-onlyinvestorsonproventrackrecordandbestinclassexecution,but

majorpush-backsareshorttermearningsrisksfromkeyfrozenmealSKUs(i.e.

cray?sh,sauerkraut?sh,crispy?sh,etc.)andweakermacro,anddemanding

valuationof33x2023EPE(vs.Haitian35x2023PE).

+852-2978-1496|fanding.sun@

GoldmanSachs(Asia)L.L.C.

ValerieZhou

+852-2978-0820|valerie.zhou@

GoldmanSachs(Asia)L.L.C.

RundongZhou

+852-2978-7983|

rundong.zhou@

GoldmanSachs(Asia)L.L.C.

BrianDai,CFA

+86(21)2401-8944|brian.dai@

BeijingGaoHuaSecuritiesCompany

Limited

Inthisnote,wesummarizeourthoughtsbyansweringfourkeyquestions:(1)

Cray?shindustrygrowthcycleandoutlookinto2023?(2)Anjoy’sstrengthand

weaknessvs.upstreamplayersinfrozenmealcategory?(3)Howresilientisfrozen

fooddemandamidconsumptiondowngrade?(4)Anyoverseascasestojustifythe

valuation?

WenoteshorttermearningsrisksonAnjoy’sfrozenmealbusinessfromcray?shand

successrateofnewSKUs,buthighlight1)theconsolidationofXinliuwusinceSep

thisyearwouldcontributeadditionalc.RMB1bnsales,or8%toplinegrowthinto

2023;2)cray?shshouldfacelessvolatiledemandbygraduallyturningfromatrendy

cuisineintoadailyconsumptionchoice;3)foodservicechannelhasproventobe

moreresilientthan2Cchannelamidconsumptiondowngrade/weakermacro.Our

studyonNorthAmerica’slargestfrozenpotatoprocessingcompanyLambWeston

(LW)atUS$12bnmarketcap(25x2023EPE)alsoservesasagoodreferencetoour

targetvaluationofUS$7.5bnonAnjoywithcomparableoperationalmatrices.

ReiterateBuyonAnjoy.

GoldmanSachsdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,

investorsshouldbeawarethatthe?rmmayhaveacon?ictofinterestthatcouldaffecttheobjectivityofthis

report.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.ForRegAC

certi?cationandotherimportantdisclosures,seetheDisclosureAppendix,orgoto

/research/hedge.html.Analystsemployedbynon-USaf?liatesarenotregistered/quali?edasresearch

analystswithFINRAintheU.S.

_

ChinaFrozenFoods

GoldmanSachs

Q1:Cray?shindustrygrowthcycleandoutlookinto2023?

Werecapthehistoryofcray?shindustrydevelopmentandnoteanexplosivegrowthof60%CAGRover2016-18ascray?shwaspromotedfromaregionaldishtoanationwidehitbynewcatering/retailbrandsand2018WorldCup.Thegrowthnormalizedto5%CAGRover2018-21andanestimated12%yoyin2022Edrivenbyconsumptionscenarioexpansionsuchasstay-at-home(e.g.ready-to-cookcray?sh),casualsnacks

(e.g.braisedcray?sh),andingredientsinotherdishessuchaspizza,pasta,sandwichesandhotpots.Weseecray?shhavinggraduallyturnedfromatrendingcuisineintoadailyconsumptionchoice,andthusexpectamoreresilientconsumerdemandgoingforward.

Nevertheless,wedorecognizehigherseasonalvolatilityofthecray?shgivenweatherconditionvs.traditionalfrozenproductsontopofconsumptiontrade-downinto2023ascray?shremainsamid-highendspendingitem.

ForAnjoy,wethinkitscray?shbusinessshouldbemoreresilientthantheoverallmarketduetoi)itsfocusonprocessingindustry,whichismoreresilientthanretailenddemandasitcouldcapturedemandacrosslowtohighend,andbothdiningoutandat-homeconsumption,andii)Xinhongye/Xinliuwu’sleadingpositiontoconsolidatethemarketastheTOP3playersleveragingscaleandAnjoy’sstrongchannelmanagement.Welookfor21%2022-25EsalesCAGRforAnjoy’scray?shbusiness,implyingtotalmarketshareupfrom4%in2022to8%in2025EbasedonRMBc.40bnex-factorymarketsizeofcray?shprocessingindustry(i.e.9%oftotalcray?shmarketsize).

Exhibit1:Cray?shproductionvolumegrowthacceleratedin2015-2018,drivenbynewcatering/retailbrandsand2018WorldCupwhilegrowthslowdownin2011and2020wereduetofoodsafefyscandalandcoviddisruptionrespectively

Crayfishproductionvolume

3500

3000

2500

2000

1500

1000

500

0

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022E

50%

40%

30%

20%

10%

0%

-10%

-20%

Crayfishproductionvolume(kton,LHS)yoy(RHS)

Source:ChinaSocietyofFisheries,Meituan

Exhibit2:Cray?shprocessingindustryisaRMBc.40bnex-factorymarketandismoreresilientthanretailenddemandundercovid

Crayfishex-fsales(RMBbn)

500

100%

80%

400

60%

300

200

40%

20%

0%

100

-20%

0

-40%

202020212022E

Crayfishprocessex-fsales(LHS)

totalex-fsalesyoy(RHS)

2016201720182019

Crayfishrestaurantsales(LHS)

Crayfishfarmingex-fsales(LHS)

Source:ChinaSocietyofFisheries,Meituan

Q2:Anjoy’sstrengthsandweaknessesvs.upstreamplayersinfrozenmealcategory?

WeseemajorcompetitorsagainstAnjoyin2BfrozenmealsegmentareupstreamplayerssuchasSunner,GuolianandNewHope.Asdetailedinourinitiation,frozenmealconsumptionposthigherrequirementinproductdiversity,taste,qualityandfaster

31October20222

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GoldmanSachs

ChinaFrozenFoods

responsetomarkettrend.WebelieveAnjoy’scomparablestrengthinchannelservice,productportfolio,marketinsightsanddedicationwillenableahighersuccessrateagainstupstreamplayers,whileitsrelativeweaknessindistributornetworkandrawmaterialcontrolcouldbegraduallyimprovedbyupstreamintegrationandscaling.

WesummarizeAnjoy’sstrengthandweaknessasbelow.

Strength

nStrongchannelservicecapability:Anjoyhasstrongerchannelservicecapacitywithhigher#ofsalespersonperdistributorat2.6vs.upstreamplayersat0.1-0.2.

nComprehensiveproductportfolioontopofresponsivemarketinsights:Anjoyprovidesmorecomprehensiveproductportfolioacross?sh,pork,chicken,beef,etc.BesidesexistingstarSKUs,i.e.cray?sh,sauerkraut?shandcrispymeat,there’salsostrongproductlineupssuchasLotusrootmeatandSeasonedporkribs.Incontrast,upstreamplayersmainlyfocusononlysingleproteinsthattheyarespecializedin.

nStrategicfocus:Webelievethecompany’sdedicationmattersforsuccess.Anjoypositionsthefrozenmealbusinessasitssecondgrowthpillarandthestrategicfocuswithfrozenmealcontributing25%of1H22sales,whileweseepreparedmealremainingasupplementalcategorytoupstreamplayers,contributing7%/8%/8%forLongdaMeishi/Shuanghui/NewHoperespectively.

Weakness

nChannelcoverage:Comparedwithupstreamplayers,Anjoyhasrelativelysmallerdistributornetworkof1,652vs.GuolianAquatic’s2kandLongdaMeishi’s8k+.Meanwhile,Anjoyalsohasmuchsmallersalespersonscale,lessthanhalfofNewHope.ButAnjoydifferentiatesitselfassmall/mediumrestaurantfocusandin-depthpenetrationinstrongregions.

nRawmaterialcostcontrol:Agriculturalplayerscouldenjoylowerrawmaterialcostsleveragingtheupstreamresource,yetAnjoyhascontinuedtostrengthenitscontrolandbargainingpoweroverupstreamsuppliersviaacquisitionandbulkpurchasing.

31October20223

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GoldmanSachs

ChinaFrozenFoods

Exhibit3:Anjoyhascomparablestrengthinchannelservice,productportfolio,marketinsightsanddedication,whileitisrelativelyweakindistributornetworkandrawmaterialcontrol.

LongdaMeishi

Preparedmealsalesin

1H22(RMBmn)

asof%oftotalsales

Products

Productspecialty

#ofSKUs

BestsellingSKUs

CrispymeatXiaoBaLongcrayfishCrispymeat"Dudu"chickenwingsCrispymeat

Crispyfriedchicken,"Dudu"

chickenwings,chiecksteak

shoulder,etc.

2B/2C:85%/15%

3%

Revenuebychannel

types

8%

3%

3%

83%

38%

Clientsincludelargechained

Majoritiesaresmallrestaurants;

c.20%fromgroupdining

n.a.n.a.

OtherregionsOverseas

Central3%3%

Shandong

42%

Revenuebyregions

Northeast

8%

100%capitalcitiesand60%

100%perfecture-levelcitiesin

EasternChina

Otherregionsarenotwell

coveredatperfecturelevelyet

4,367

2.6

Note:Sunnerpreparedmealsalesincludesdeepprocessingproducts.NewHopeLiuhepreparedsalesisfoodsegmentsales.

perfecture-levelcities

Penetratedintocounty-levelcities

inChinaSouthwest,North,East,

andSouthmarkets

10,284

n.a.

Grilledfish,Crayfish,Sauerkraut

Fish,etc.

2B/2C:80%/20%

18%

Anjoy

1,794

25%

Fish,pork,chicken,beef,etc.40

38%

mainlylargerestaurantsandactivelyexpandsmall/medium

cleints

8,850

restaurants(i.e.KFC,McDonald,Focusonlargerestaurantclient

etc.),KA,groupdining,export,expansionandgroupdining

medium/smallrestauratnsetc.

NewHopeLiuhe

4,913

8%

Pork

100+

GuolianAquatic

561

23%

Seafood

100

City-tiercoverage

#ofsalespersonSalesperson#perdistributor

50%salestolargerestaurants

2,000

2Bsaleschannelbreakdown&strategy

#ofdistributors

StarSKUs

ChannelRevenueby2B/2C

Sunner

2,928

30%

Chicken60

Crispymeat(RMB1bnsalesin

2021)

Bacon,Crispymeat,Prepared

porkbelly,preparedpork

2B/2C:60%/40%

2%5%

10%

Increasingpenetrationintoperfecture-levelcities

508

7%

Pork100

Crayfish,Crispymeat

569

n.a.

7%Southwest

4%

423

0.2

745

0.1

Guangdong

11%

East

(others)

44%

Southwest10%

Overseas11%

Overseas

13%

Northwest5%

Overseas50%

Central11%

Central14%

5%

8%

South11%

1,652

3214%%

China89%

China50%

Fujian16%

North10%

n.a.

n.a.

n.a.

n.a.

East32%

East56%

64%

31%

59%

36%

32%

76%

18%

5%

Source:Companydata

31October20224

MAPfrozen

fishsurimi

Mashedshrimp

ChibaTofu

MAPfrozen

meatball

Crispymeat

Sauerkrautfish

Lotusrootmeat

Northern

snakeheadslice

Beeftripe

Thousand-layered

tripe

Seasoned

porkribs

_

GoldmanSachs

ChinaFrozenFoods

Exhibit4:Anjoyhasmorediversi?edproductportfoliovs.upstreamcompetitorswithstrongproductlineupsfollowingcray?sh,crispymeatandsauerkraut?sh

StarSKUperformances

Sales(incl.tax)in10M22(LHS)Growthyoy(RHS)

RMB,mn

120%

450

100%

400

80%

300

60%

250

40%

20%

100

0%

50

-20%

Anjoy

Kitchen

Note:SalesforMAPfrozen?shballandMAPfrozenmeatballarebasedon9M22,excl.tax.CrispymeatsalesisbasedonApr-Oct,incl.tax.

Source:Companydata

Q3:Howresilientisfrozenfooddemandamidconsumptiondowngrade?

Corebusiness

Mr.Frozen

200

150

350

500

0

Westudyfrozenfoodplayers’performancesduringthehistoricaldowncyclesand?ndoutthatfrozenfoodindustryatretailsideismorevulnerableunderweakermacro,possiblyduetoconsumptiondowngradetoconveniencefood,whilefoodservice

demandwasrelativelymoreresilientasrestaurantplayersacceleratedthereplacementoffrozenfoodwithon-sitecookingtosavecostsamidtoplineandin?ationpressure.

During4Q13-1Q15propertydowncycle,weobservethatAnjoymaintainedsimilargrowthmomentumat24%salesgrowthyoyin2014vs.25%in2013whileSanquan’ssalesgrowthdeceleratedto14%in2014vs.17%CAGRover2011-2013despitepositivecontributionfromLongFeng’sconsolidationsince4Q13.Morerecently,duringthedowncyclein2H18whenretailsales/consumerexpenditure/disposableincomegrowthsloweddown,weobservethatAnjoyrecordedtoplinegrowthyoyat25%vs.19%in1H18and18%in2H17whileSanquan’ssalesgrowthdeceleratedto2%from8%in1H18and7%in2H17.

WealsolookatJapan’sfrozenfoodindustryatgrowthstageduringthehistoricaldowncyclesin1974-1997andobservethesimilardefensiveperformancesoffoodservicechannelwithsteadygrowthin1st/2ndoilcrisisandJapan’srecessionin1990s.

31October20225

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

3Q16

4Q16

1Q17

2Q17

3Q17

4Q17

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

_

PerourUSagribusinessteam,LWhasnormallytradedatapremiumtofoodandbeveragepeers(includingCPB,GIS,K,KHC,MDLZ,HSY,SJM,CAG,POST,KO,PEP,NESN,MKC,HRL)ata10%onaverageforNTMP/EoveritstradinghistorybeforeCovid.ThepremiumrewardedLW’swell-establishedcustomerbaseandabove-average

GoldmanSachs

ChinaFrozenFoods

Exhibit6:WeobservesimilarresilientperformanceoffoodservicechannelforfrozenfoodindustryinJapan

Frozenfoodproductionvolumevs.GDPgrowth

mnton

1990sJPrecession(LostDecade)

1,000

13%

15%

12%

10%

11%

5%

400

10%

9%

-2%

8%

Anjoycorebusiness(LHS)Sanquan(LHS)Totalretailsalesyoy(RHS)

Note:SanquanconsolidatedLongFenginto?nancialstatementin4Q13.

Source:NBS,Companydata

Q4:Anyoverseascasestojustifythevaluationpremium?

InvestorshavebeenquestioningthevaluationpremiuminfrozenfoodsectoragainstotherF&Bsector,withnoestablishedlargescaleplayersindevelopedmarketasreference.HerewedoadeepdiveinaUS$12bn+marketcapcompanyLambWeston(LW)-thelargestNorthAmericanandsecond-largestglobalfrozenpotatoprocessingcompanywith75%salesfrom2Bchannel,orc.10%salesfromMcDonald’sasof2019.Itmainlyproducesfrozenfrenchfries,waf?efries,andotherfrozenpotatoproducts.

Exhibit5:Retailfrozenfoodmarketismorevulnerableeconomywhilefoodservicechannelisrelativelymore

16%

14%

12%

10%

8%

6%

4%

2%

0%

underweakdefensive

19792ndoilcrisis

1980-83globalrecession

Source:JapanFrozenFoodAssociation

4Q13-1Q15:propertydowncycle

0%

-5%

-10%

2B(LHS)2C(LHS)

2H18:weakconsumption

30%

25%

20%

19741stoilcrisis

GDPgrowth(RHS)

15%

14%

200

0

800

600

1,200

-4%

industryearningsgrowth.SuchfastergrowthofleadingfrozenfoodplayersisalsohappeninginChinamarketat25%2022-25ENICAGRagainstthatinotherF&Bsectorsof16%,drivenbyindustrystructuralgrowth,consolidationupside,andmarginexpansionfromscalebene?t.Wethusthinkoursectorvaluationbenchmarkofa24xP/Eforplayersatamaturelevelisreasonable,rewardingthesector’shighergrowthpro?le.

31October20226

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GoldmanSachs

ChinaFrozenFoods

Exhibit7:LWtradesatanaverage10.2%premiumtoF&Bpeerson

NTMP/Eover2016-2019.

HistoricalLWNTMP/ErelativetoFood&Beveragepeers

50%

Average:10.2%Premium

40%

Current:9.2%Discount

30%

20%

10%

0%

(10%)

(20%)

(30%)

(40%)

Nov-16May-17Nov-17May-18Nov-18May-19

Premium/(Discount)Average

Peerset:CPB,GIS,K,KHC,MDLZ,HSY,SJM,CAG,POST,KO,PEP,NESN.MKC,HRL

Source:FactSet

Exhibit8:WeseeLambWeston,thelargestNorthAmericafrozenpotatoprocessingcompany,servingasagoodreferencetoAnjoy

CY2021

Valuation

Marketcap(USDbn)2023EP/E

2023EEV/EBITDAFinancials

Sales(USDmn)GPM

OPM

NPM

ROE

Growthdriver

Business

Productmix

LambWeston

12.4

24.5x

14.9x

3,911

21.2%

11.7%

7.9%

78.3%

-Low-teenglobalandfoodservicesalesgrowth;HSDretailsalesgrowth

Potatoproduct,

100%

Anjoy

5.5

33.2x

18.2x

1,438

22.1%

7.8%

7.4%

15.5%

-Mid-teencorebusinesssalesgrowth

-40%+frozenmealsalesgrowth

AnjoyKitchen,2%

Mr.Frozen,5%

Crayfish,10%

Anjoycore

business,

83%

Anjoy(CY2026)

3,498

23.3%

10.9%

8.7%

14.1%

AnjoyKitchen,7%

Mr.Frozen,6%

Crayfish,16%

Anjoycore

business,

71%

Note:PriceasofOct28close.

Source:Companydata,GoldmanSachsGlobalInvestmentResearch

Ratings,TPsandRisks

Exhibit9:ChinaFrozenFoods-ValuationCompTable

TPImplied

NPyoy2023E

20%

144%

33%

52%

38%

-1%

8%

23%

24%

31%

37%

Divyield2022E

0.8%

Salesyoy

EV/EBITDA2022E2023E2024E

Price10/28/2022

ROE

2022E

PEG

22-24ERevCAGR

24%

22-24E

NPCAGR

YTDperf%

-20%-30%

6%

-42%

-9%-30%

-50%-32%

-46%

-42%-30%

NPM

2022E

PE

2023E

PB

2022E

PE

Company

Ticker

Rating

Ccy

12-mTP

+/-

2022E

2024E

2022E

2024E

2023E

2022E

50X

54X

54X

91X

50X

22X

30X

n.a.

n.a.

n.a.

50X

2023E

46X

24X

41X

60X

36X

22X

28X

n.a.

n.a.

n.a.

37X

2022E

2024E

2024E

Mktcap

US$mn

Frozenfoodsupplychain

187.00

47.00

25.10

91.00

54.00

18.00

44.00

n.a.

n.a.

n.a.

37X

27X

8%

30%

8%

32%

7%

19%7%

8%

24%

16%

24%17%

30%

19%

23%

37%

22%

1.5X

37X

FuJianAnjoyFoodsCo.

JueweiFood

SichuanTewayFoodGroup

LigaoFoods

Qianweiyangchu

SanquanFoods

Weizhixiang

Babi

Namchow

Hi-RoadFood

3X

12%

8%

9%

8%

9%21%

12%

33X

47%

-54%

90%

-40%

5%13%

10%

-22%

0%

9%

6%

603345.SS

603517.SS

603317.SS

300973.SZ

001215.SZ

002216.SZ

605089.SS

605338.SS

605339.SS

300915.SZ

CNY

136.02

47.65

28.47

76.28

53.00

14.18

47.16

24.49

18.66

33.29

23X

29X

57X

42X

24X

12X

28X

n.a.

n.a.

n.a.

31X

18X

16X

41X

28X

18X

11X

23X

n.a.

n.a.

n.a.

22X

14X

13X

31X

18X

14X

10X

19X

n.a.

n.a.

n.a.

17X

BuyNeutral

Neutral

Neutral

NeutralNeutral

SellNC

NC

NC

5,497

CNY

CNY

CNY

CNY

CNY

0.6%

0.7%

0.4%

0.3%1.6%

2.3%

0.5%

n.a.

0.0%0.8%

27X

46X

50X

36X

17X

30X

65X

61X

76X

49X

17X

32X

21X

36X

32X

27X

16X

25X

0.3X

1.5X

0.9X

1.0X

3.7X

2.3X

1.1X

93%

75%

1.4X

6%

13%

6%

6%10%

18%

17%

13%

33%

21%11%

20%

-1%

-12%

19%

2%27%

-7%

21%

19%

24%

31%7%

21%

76%

30%

55%

36%5%

13%

27%

26%

58%

34%11%

19%

19X

32X

38X

27X

20X

23X

n.a.

n.a.

n.a.

28X

19%

16%

29%

26%9%

20%

5X

5X

6X

4X

3X

4X

4,035

2,959

1,780

633

1,718

CNY

CNY

CNY

CNY

650

24%

17%

25%22%

17X

14X

14X

23X

14%

11%

0%9%

22%

23%

33%31%

22%

22%

35%28%

11%

10%

8%11%

20X

17X

19X

30X

25X

21X

24X

41X

21%

18%

23%20%

3X

2X

2X

4X

22%

17%

24%21%

n.a.

n.a.

n.a.

835

1,097

412

Avg.

AsofOct28thclose.

Source:Bloomberg,GoldmanSachsGlobalInvestmentResearch,GaoHuaSecuritiesResearch

31October20227

_

Exhibit10:ChinaFrozenFoods-growthdriversandkeyriskssummary

2017-2021CAGR2022-2025CAGR

GoldmanSachs

ChinaFrozenFoods

KeyRisks

1-lower-than-expectedfrozenmealbusinessgrowth;2-shareholdingreductionbyseniormgmt;3-risingrawmaterialcosts;4-foodsafety.

1-higher/lower-than-expectedcovidsituationimprovement;2-higher/lower-than-expectedperformancesofSam'sClub;3-shareholdingreductionbymajorshareholders;4-rawmaterialcosts;5-intensifying/easingcompetitioninfrozenbakerymarket;6-foodsafety.

1-topclientconcentrationrisks;2-relatedpartyrisks;3-foodsafety;4-faster-than-expecteddistributionchannelgrowth;5-better-than-expectedcovidsituationimprovement

1-higher/lower-than-expectedfoodservicechannelgrowth;2-higher/lower-than-expectednewproducts'performances;3-Covidresurgence/recovery;4-rawmaterialcosts;5-shareholdingstructure;6-foodsafety.

1-launchofnewRSUscheme;2-successfulstorerolloutinnewregions;3-covidresurgence;4-easiercompetitivelandscape;5-rawmaterialcosts

CompanyKeyGrowthDrivers

FuJianAnjoyFoods1-productdiversification;2-regional

Co.penetration;3-newcategoryexpansion

1-productdiversification;2-lower-tiercitypenetration;3-newchannelexpansion

1-productdiversification;2-newclientexpansion;3-distributionchanneldevelopment

1-productdiversification;2-mixupgrade;3-categoryexpansion

1-coremarketpenetration,2-newregionexpansion,3-wholesaleschannelexpansion

Ticker

603345.SS

300973.SZ

001215.SZ

002216.SZ

605089.SS

Sales

28%

31%

21%

7%

21%

Sales

22%

27%

22%

9%

19%

NP

35%

59%

17%

73%

26%

NP

22%

50%

31%

7%

14%

Qianweiyangchu

SanquanFoods

Weizhixiang

LigaoFoods

Source:Companydata,GoldmanSachsGlobalInvestmentResearch,GaoHuaSecuritiesResearch

31October20228

_

GoldmanSachs

ChinaFrozenFoods

DisclosureAppendix

RegAC

We,CathyChen,CFAandBrianDai,CFA,herebycertifythatalloftheviewsexpressedinthisreportaccuratelyre?ectourpersonalviewsaboutthesubjectcompanyorcompaniesanditsortheirsecurities.Wealsocertifythatnopartofourcompensationwas,isorwillbe,directlyorindirectly,relatedtothespeci?crecommendationsorviewsexpressedinthisreport.

Unlessotherwisestated,theindividualslistedonthecoverpageofthisreportareanalystsinGoldmanSachs’GlobalInvestmentResearchdivision.

GSFactorPro?le

TheGoldmanSachsFactorPro?leprovidesinvestmentcontextforastockbycomparingkeyattributestothemarket(i.e.ourcoverageuniverse)anditssectorpeers.Thefourkeyattributesdepictedare:Growth,FinancialReturns,Multiple(e.g.valuation)andIntegrated(acompositeofGrowth,FinancialReturnsandMultiple).Growth,FinancialReturnsandMultiplearecalculatedbyusingnormalizedranksforspeci?cmetricsforeachstock.Thenormalizedranksforthemetricsarethenaveragedandconvertedintopercentilesfortherelevantattribute.Theprecisecalculationofeachmetricmayvarydependingonthe?scalyear,industryandregion,butthestandardapproachisasfollows:

Growthisbasedonastock’sforward-lookingsalesgrowth,EBITDAgrowthandEPSgrowth(for?nancialstocks,onlyEPSandsalesgrowth),withahigherpercentileindicatingahighergrowthcompany.FinancialReturnsisbasedonastock’sforward-lookingROE,ROCEandCROCI(for?nancialstocks,onlyROE),withahigherpercentileindicatingacompanywithhigher?nancialreturns.Multipleisbasedonastock’sforward-lookingP/E,P/B,price/dividend(P/D),EV/EBITDA,EV/FCFandEV/DebtAdjustedCashFlow(DACF)(for?nancialstocks,onlyP/E,P/BandP/D),withahigherpercentileindicatingastocktradingatahighermultiple.TheIntegratedpercentileiscalculatedastheaverageoftheGrowthpercentile,FinancialReturnspercentileand(100%-Multiplepercentile).

FinancialReturnsandMultipleusetheGoldmanSachsanalystforecastsatthe?scalyear-endatleastthreequartersinthefuture.Growthusesinputsforthe?scalyearatleastsevenquartersinthefuturecomparedwiththeyearatleastthreequartersinthefuture(onaper-sharebasisforallmetrics).

ForamoredetaileddescriptionofhowwecalculatetheGSFactorPro?le,pleasecontactyourGSrepresentative.

M&ARank

Acrossourglobalcoverage,weexaminestocksusinganM&Aframework,consideringbothqualitativefactorsandquantitativefactors(whichmayvaryacrosssectorsandregions)toincorporatethepotentialthatcertaincompaniescouldbeacquired.WethenassignaM&Arankasameansofscoringcompaniesunderourratedcoveragefrom1to3,with1representinghigh(30%-50%)probabilityofthecompanybecominganacquisitiontarget,2representingmedium(15%-30%)probabilityand3representinglow(0%-15%)probability.Forcompaniesranked1or2,inlinewithourstandarddepartmentalguidelinesweincorporateanM&Acomponentintoourtargetprice.M&Arankof3isconsideredimmaterialandthereforedoesnotfactorintoourpricetarget,andmayormaynotbediscussedinresearch.

Quantum

QuantumisGoldmanSachs’proprietarydatabaseprovidingaccesstodetailed?nancialstatementhistories,forecastsandratios.Itcanbeusedforin-depthanalysisofasinglecompany,ortomakecomparisonsbetweencompaniesindiffere