Core views
With market demand gradually recovering, the company's overall revenue for the Q1 quarter maintained steady growth. Looking at specific products, the company's kitchen food business has benefited from the gradual recovery of the domestic catering industry, while sales of feed ingredients and grease technology businesses have also increased year-on-year. In terms of profit, the gross margin of the kitchen food business increased year-on-year, mainly because the cost of the main raw materials was lower than the same period last year, while the profitability of related products in the feed raw materials and oil technology business was squeezed as the market declined. The company's main business is expected to maintain steady growth in '23 as demand recovers, and the launch of new businesses such as Central Chef will also contribute to the increase in volume.
occurrences
The company released its report for the first quarter of 2023:
During the reporting period, the company achieved operating income of 61,041 million yuan, an increase of 7.97% over the previous year; Guimu's net profit was 854 million yuan, an increase of 645.99% over the previous year; after deducting net profit of non-Gumo, it was 240 million yuan, a decrease of 70.94% over the previous year.
Brief review
Downstream demand has recovered steadily, and revenue has grown steadily
Q1 With market demand gradually recovering, the company's overall revenue in a single quarter maintained steady growth. Looking at specific product segments, the company's kitchen food business, on the one hand, was accompanied by a gradual recovery in the domestic catering industry, and sales increased year-on-year. At the same time, the company is also stepping up efforts to promote high-end kitchen food. In the future, along with the recovery of consumer spending power, this process is expected to accelerate. In addition, the company is also targeting new consumption channels such as O2O to satisfy the consumption habits of young people. At the same time, sales of the company's feed ingredients and grease technology business increased year-on-year in the first quarter, which in turn led to a year-on-year increase in operating income. In the future, as the downstream aquaculture industry improves, demand is expected to increase further, driving revenue growth in the feed sector.
Cost pressure has been reduced marginally, and the cost rate is generally stable
The company's 23Q1 gross margin fell 2.02 pcts year on year, but increased 0.03 pcts from 22Q4. Although the cost side is still under pressure, the marginal level has been mitigated. Among them, the gross margin of the kitchen food business increased year-on-year, mainly because the cost of major raw materials such as soybeans, soybean oil, and palm oil was lower than the same period last year. However, in the process of market decline in the feed raw materials and oil technology business, the profitability of related products was squeezed. In terms of expenses, the year-on-year changes in the company's sales/management/R&D/finance rates were -0.30/+0.16/-0.00/-0.33pcts respectively, and the overall fluctuation was small. Furthermore, during the reporting period, the company confirmed profits and losses from derivative financial instruments that did not fully meet the hedging requirements, which ultimately caused the company's net interest rate to return to the mother to increase by 1.20 pcts year over year, while net interest rate after deducting non-return to the parent fell 1.07 pcts year on year.
Demand from the main business is improving, and we look forward to an increase in the contribution of new businesses
As a leader in the grain and oil sector, the company's main business is expected to maintain a steady growth trend in '23 against the backdrop of a recovery in downstream demand such as catering. On the profit side, prices of major raw materials have improved year-on-year, and subsequent profit performance is expected to gradually improve. In terms of new business, the company has expanded around the kitchen food sector in recent years, including condiments, central cooking, etc. Among them, as far as the central chef project is concerned, central kitchen projects in Hangzhou, Zhoukou, and Chongqing have been successfully put into operation, and central kitchen bases such as Xingping, Shenyang, and Langfang will also be completed and put into operation in '23. The Central Chef project will give full play to the company's comprehensive operating advantages and achieve resource sharing within the park. At the same time, the products produced by Central Chef, such as prepared dishes and bento boxes, will further enrich the company's product matrix, and cooperation with enterprises in the park in logistics and warehousing is also expected to contribute additional volume.
Profit forecast:
Based on the company's latest annual report, it is estimated that in 2023-2025, the company will achieve revenue of 2,848, 317.9, 356.7 billion yuan, and net profit of 41.49, 59.19, and 8.504 billion yuan. The corresponding EPS is 0.77, 1.09, and 1.57 yuan/share. If equity incentive expenses are reduced, net profit returned to the mother is expected to be 42.62, 60.00, and 8.544 billion yuan in 2023-2025, corresponding to EPS of 0.79, 1.11, and 1.58 yuan/share.
Risk warning:
1) Risk of rising prices of raw materials such as soybeans: Direct materials account for a relatively high share of production costs in the condiment industry. Prices of major agricultural products such as soybeans have fluctuated greatly in recent years, which has had a great impact on the company's profits. If the price of raw materials continues to rise further, it will have an adverse effect on the company's performance. 2) Food safety risks: Condiments are frequently used in production and life, and are widely used. They are directly related to people's diet health. If related food safety incidents occur, it will reduce the public's trust in the company's products and have a major adverse impact on the company's business operations. 3) Risk that demand recovery falls short of expectations: Currently, the company's operations are still constrained by the recovery process of downstream demand. If demand does not recover as expected, the company's operating performance will still face some pressure in the short term.