1H23 performance is basically in line with our expectations
1H23 achieved total operating income of 2,327 million yuan, +3.0% year-on-year; realized net profit of 497 million yuan, +17% year-on-year (the 1H22 base is about 424.9 million yuan according to the adjusted profit caliber). The 1H23 results were largely in line with our expectations.
Development trends
The revenue side of 1H23 is in a period of growth recovery, and recovery is relatively slow under the influence of product restructuring and channel diversion. 1H23 The revenue of flavored noodle products/vegetable products/soy products and other products was about 1,29/9.3/105 million yuan, respectively, -3.9%/+14.1%/3.7% over the same period last year. Judging from the volume-price split, the sales volume of the three categories of products was -24%/-1.8%/-10.1%, respectively, and the average sales price (sales/sales volume) was +26.5%/+16.2%/+15.3%, respectively. We expect 1H23's sales volume to be under pressure, and the rise in average sales price is mainly due to the company's product restructuring in the second half of last year (actively cutting out products with a retail price of 0.5 yuan, and upgrading and improving product specifications and prices), and the decline in bulk products in the scattered supermarket area due to a decline in supermarket traffic.
1H23 benefited from the 2H22 price increase and cost improvement, and the gross margin increased to 47.5%, and the net interest rate (adjusted net profit calculation) increased to 21.4%. Gross profit margin: 2H22 The company has reorganized the product specifications and price system, the overall tonnage ASP has increased, and the cost side of 1H23 has also declined somewhat. In terms of expenses: 1H23 has a sales expense rate of 15.8%, year-on-year/month-on-month +3.9/+0.4ppt. Company 1H23 continues to promote channel cultivation. In May, the company added additional sales personnel and increased expenses in accordance with the plan.
2H23 outlook: Revenue growth will accelerate driven by new channels and products. Channel side: On the one hand, product specifications and price system adjustments began with 2H22, so 2H22 sales volume is on a relatively low base; on the other hand, the company began strengthening the connection with snack discount store channels around April 2023. The company held an investor day research event on May 18, indicating that the annualized revenue volume of the snack discount store channel is expected to reach 300 million yuan, and the revenue share of the snack discount channel is expected to continue to increase in the next two years. Product side: The company plans to launch new product series and new categories among existing categories in the second half of the year, thereby contributing to increased revenue.
Profit forecasting and valuation
We kept our profit forecast unchanged, i.e. 2023/2024 net profit of $1,09/1.29 billion, respectively. The current stock price corresponds to 13.9/11.4 times P/E in 2023/24. We maintain a target price of HK$10.50 and outperform the industry rating. Currently, the stock price has room to rise by about 45.6% from the target price. The target price corresponds to 20.2/16.6 times P/E in 2023/24.
risks
The growth of new products fell short of expectations, and food safety was at risk.