2023Q1 revenue increased 14.53% year-on-year, and homed net profit rose 32.5% year-on-year. The company's 2023Q1 realized operating income of 261 million yuan, + 14.53% year-on-year, net profit of 31 million yuan, + 31.25% year-on-year, non-net profit of 30 million yuan, + 33.23%, and basic earnings per share of 0.05 yuan, compared with 0.04 yuan in the same period last year. The company's gelatin series product business increased steadily, market demand improved, sales revenue and profits increased steadily over the same period last year; with the in-depth promotion of "collagen +" series products, the business of collagen series products developed steadily, and sales revenue increased year-on-year; capsule business increased steadily, sales revenue increased compared with the same period last year, and sales profits increased.

The expense rate is well controlled and the profitability is steadily improved. The company's 2023Q1 gross profit margin is 25.61%, year-on-year + 1.52 pct; on the expense side, the 2023Q1 expense rate is 8.91%, year-on-year-1.36pct, in which the sales expense rate / management expense rate / R & D expense rate / financial expense rate are 1.83%, 4.72%, 2.28%, 0.08%, respectively-0.25pct/-0.77pct/+0.01pct/-0.34pct. The reduction of financial expenses by 79.22% is mainly due to the fact that the interest income of the current period is higher than that of the previous period. 2023Q1's net interest rate is 13.27%, year-on-year + 2.44pct.

The net cash flow of operating activities decreased and the speed of inventory turnover accelerated. In terms of cash flow, the net cash flow generated by the company's operating activities in 2023Q1 is-22 million yuan, compared with 25 million yuan in the same period last year, mainly due to the fact that the cash received from the sales of goods and other cash related to business activities in the current period are less than those in the previous period, as well as the cash paid to employees and the various taxes and fees paid for the employees in the current period. The annual inventory of the 2023Q1 company is 325 million yuan,-4.28% compared with the same period last year; the number of inventory turnover days is 148.78 days, a decrease of 29.33 days compared with the same period last year, and the inventory turnover speed is accelerated.

Investment suggestion: the company focuses on the whole industry chain of natural collagen, forming a production, R & D, sales and service system of high-quality bone grain base-gelatin-collagen-nutritional health products / medicinal materials. formed a good technical reserve, brand effect and customer reputation. In recent years, the company has further accelerated the strategic landing, continuously improved the efficiency of operation and management, actively intensified technological innovation, and developed extended products around gelatin, collagen and hollow capsules, with layout in "medicine, health, food and beauty". With the rapid development of the collagen industry and the continuous improvement of public health awareness, the company's revenue is expected to achieve sustained growth. We predict that the EPS of the company from 2023 to 2025 will be 0.23,0.26,0.29 respectively, and the corresponding PE will be 27X, 24X and 21X respectively, maintaining the investment rating of "increasing holdings".

Risk hint: the expansion of business scale may bring management risk, market competition aggravates risk, raw material price fluctuation risk, retail series product market expansion process may exist the risk of mismatch between input and return, policy risk, the risk of raising funds for investment projects does not meet expectations.