On October 25, 2023, Weizhixiang released its report for the first three quarters of 2023.

Main points of investment

Overall performance is under pressure and profitability continues to improve

The total revenue of 2023Q1-Q3 is 619 million yuan (up 2%), the net profit of returning to the mother is 107 million yuan (down 3%), the total revenue of 2023Q3 is 202 million yuan (down 12%), and the net profit of returning to the mother is 33 million yuan (down 19%), mainly due to the sharp decline in sales of beef and meat products compared with the same period last year. On the profit side, the 2023Q1-Q3 gross profit margin / net profit margin is 26.16% / 17.32%, respectively, compared with the same period last year, + 2pctyogurt / 2pctmax / 2023Q3 gross profit margin / net profit rate is 26.25% / 16.10%, respectively, compared with the same period last year + 2pct/-1pct, respectively, the pressure on raw materials is reduced. On the expense side, the 2023Q1-Q3 sales expense rate / management expense rate is 4.80% / 4.71% respectively, and the sales expense rate / management expense rate is 5.85% / 6.15% respectively compared with the same period last year, which is mainly due to the personnel expansion caused by the expansion of the sales area and the increase in salary expenses compared with the same period last year.

The channel of Shang Chao is growing month-on-month, and the production capacity can go up.

From a product point of view, the revenue of 2023Q3 meat, poultry / aquatic products / other products is RMB 0.52 billion respectively, which is 26% higher than that of the same period last year. In meat and poultry, the revenue from beef / poultry / pork / mutton was 0.81, 0.37 and 0.16 million yuan respectively, which was-23%, 3%, 9% and 2% respectively compared with the same period last year. The sales of beef and meat products were obviously under pressure in the third quarter. Among the aquatic products, the revenue of fish / shrimp was 0.29 million yuan respectively, which was-11% and 14% respectively compared with the same period last year. From a sub-channel point of view, the revenue of 2023Q3 franchise stores / distributors / wholesale / direct sales and other / e-commerce customers is 1.09, 0.24, 0.53, 0.03, 0.004 billion yuan, respectively, compared with the same period last year. 6%, 27%, 25%, 5%, 82%. This year, the company opened up new business and achieved 9 million yuan in revenue in the third quarter, an upward trend compared with the previous quarter. From a regional point of view, the revenue of 2023Q3 in East China / Central China / North China / South China / Southwest / Northeast respectively

1.87Accord 0.06Accord 0.02Accord 0.04Universe RMB 0.001 billion, respectively, compared with the same period of last year-13% Universe 16% Universe 20% Universe 63% Greater 65% Universe 23%. As of the end of 2023Q3, the total number of dealers was 3103, a net increase of 67 compared with the beginning of 2023, of which the number of franchise stores / dealerships / merchant customers / wholesale customers was 1798, 726, and 60, respectively. In terms of production capacity, the "annual production capacity of 50,000 tons of fermentation conditioning food project" has been put into production, and the production capacity will be gradually released with the actual operating demand. The "annual production of 5,000 tons of food fermentation bacteria liquid project" is currently in trial production. The landing of the new production capacity not only optimizes the taste of the product, but also improves the product quality, which provides a guarantee for improving the supply capacity / stability of the product.

Profit forecast

We are optimistic that the company will deeply cultivate the field of prefabricated vegetables and strengthen the construction of channels. According to the three quarterly reports, we adjust the EPS for 2023-2025 to 1.07, 1.30, and 1.56 yuan (the previous value is 1.24, 1.57 and 1.97, respectively), and the current share price corresponds to a multiple of PE, respectively, in 35-29-24, maintaining the "buy" investment rating.

Risk hint

Macroeconomic downside risks, lower-than-expected production capacity progress, intensified market competition, rising risks of raw materials, and so on.