On October 26, 2023, the golden dragon fish released its report for the first three quarters of 2023.

Main points of investment

Performance compared with the previous month, profitability rebounded sharply

2023Q1-Q3 's total revenue was 188.522 billion yuan (up 0.4%) and its net profit was 2.129 billion yuan (down 10%), mainly due to a year-on-year increase in sales of kitchen food / feed raw materials / oil technology products but a drop in prices; 2023Q3's total revenue was 69.809 billion yuan (up 2%), and its net profit was 1.163 billion yuan (up 208%). At the profit end, the 2023Q1-Q3 gross profit margin / net profit margin is 4.74% / 1.10%, respectively, compared with the same period last year. The gross profit margin / net profit rate of 2023Q3 is 5.75% / 1.84%, respectively, compared with the same period last year. The decline in the cost of major raw materials such as soybean / soybean oil / palm oil has led to an increase in gross profit margin. On the expense side, the 2023Q1-Q3 sales expense rate / management expense rate is 2.42% / 1.41%, respectively, compared with the same period last year-0.01pct/+0.1pct; the 2023Q3 sales expense rate / management expense rate is 2.24% / 1.27%, respectively, and the rate is basically stable compared with the same period of last year-0.04pct/-0.004pct.

Promote the high-end of basic products, and accelerate the layout of central kitchen capacity.

On the product side, on kitchen food, sales of low-margin products in 2023Q1-Q3 catering / food industry channels increased significantly, resulting in a decrease in kitchen food profits compared with the same period last year. 2023Q3 wheat inventory cost returned to the normal level, flour business profits rose compared with the same period last year; feed raw materials and oil technology, 2023Q3 feed raw material profits increased year-on-year, mainly due to tight soybean supply, soybean meal and other product prices rebounded, crushing profits increased significantly compared with the same period last year, while oil technology products 2023Q3 profits also increased significantly compared with the same period last year. On the whole, the company continues to promote the development of high-end items of basic products to meet consumers' demand for high-end products. On the channel end, on the retail channel, the decline in the cost of raw materials leads to an increase in gross profit margin of retail channel products compared with the same period last year; in catering channels, under the depressed macro environment, because the company has the cost advantage of the whole link from raw material processing to product marketing, the competitiveness of food and beverage channels is expected to be further improved. Central kitchen business, at present, Hangzhou / Xingping / Zhoukou / Chongqing central kitchen has been put into production, the company plans to promote the development of central kitchen through "self-management + investment" mode, one-stop to achieve the integration of upstream and downstream ingredients, and constantly expand the comprehensive competitiveness of enterprises and brands.

Profit forecast

We are optimistic about the company as the kitchen food leader, actively seek diversified development, the central kitchen business is expected to release the company's performance growth space. According to the three quarterly reports, we adjust the EPS for 2023-2025 to 0.51 PE 0.76 Universe 1.03 yuan (the previous value is 0.70 Universe 0.96 Universe 1.31 yuan, respectively), and the current share price corresponds to the multiple of 65-43-32, maintaining the "Buy" investment rating.

Risk hint

Macroeconomic fluctuation risk, industry policy change risk, consumption recovery is less than expected, downstream demand fluctuation, raw material price fluctuation and so on.