occurrences

On August 24, 2023, Zuming Co., Ltd. released the 2023 semi-annual report.

Key points of investment

Performance is in line with expectations, and profits are under pressure in the short term

2023H1's revenue was 677 million yuan (same decrease of 7%), and net profit from parent was 18 million yuan (same decrease of 24%). The gross profit margin for the first half of the year was 25.43% (same increase of 1 pct); net interest rate of 2.34% (same decrease of 1 pct); sales expense ratio of 14.97% (same increase of 0.1 pct); management expense ratio of 4.83% (same increase of 0.3 pct); sales tax and additional share of 0.56% (same increase of 0.1 pct); net operating cash flow of 68 million yuan (same increase of 169%). Among them, revenue for 2023Q2 was 352 million yuan (same decrease of 10%), and net profit of return to mother was 08 billion yuan (same decrease of 46%). The gross profit margin was 25.2% (same decrease of 0.4 pct), net interest rate of 2.04% (same decrease of 2 pct), sales expense ratio of 15% (same increase of 0.5 pct), management expenses rate of 4.95% (same increase of 0.2 pct), and sales tax and surcharges accounted for 0.58% (same increase of 0.1 pct).

Focus on developing new channels, and nationwide expansion is ongoing

By product, the revenue of 2023H1 fresh soy products/vegetable protein drinks/casual soy products/other products was 4.47/0.89/0.38/77 million yuan, a decrease of 10%/1%/7%/13%. By channel, 2023H1 distribution/direct sales/supermarket revenue was 445/0.72/134 million yuan, a decrease of 4%/1%/25%. Looking at the subregion, revenue for 2023H1 Zhejiang/Jiangsu/Shanghai/other regions/overseas regions was 4.43/1.31/0.68/0.33/02 billion yuan, respectively, with a year-on-year ratio of -6%/+1%/-33%/+43%/-17%. By the end of 2023H1, there were a total of 1,746 dealers, a net increase of 102. The company will increase brand promotion efforts and consumer interaction through new media and other channels. In the future, it will actively embrace new channels and focus on live streaming, short videos, and private sector group purchases.

Profit forecasting

We are optimistic that the company will form a production line pattern based on fresh soy products, vegetable protein drinks and casual soy products as development priorities, and supplements with other types of products, creating a new growth curve. According to the interim report, we slightly adjusted the 2023-2025 EPS to 0.57/0.85/1.16 yuan (previous values were 0.65/0.91/1.24 yuan, respectively). The current stock price corresponding to PE is 40/27/20 times, respectively, maintaining the “buy” investment rating.

Risk warning

Macroeconomic downturn risks, mergers and acquisitions falling short of expectations, risk of rising raw materials, promotion of new products falling short of expectations, etc.