Matters:
Recently, we have been tracking the business situation of Ligao Foods. The relevant content and opinions are now fed back as follows:
Commentary:
Preparation for the Spring Festival was steady, and all channels performed well, in line with pre-holiday expectations. Regardless of the impact of the Spring Festival stalled period, if the January-January data is combined, the company as a whole is expected to achieve healthy and steady growth. Among them, restaurants and new retail continue to grow at a relatively rapid rate, and bakery stores are expected to remain flat or slightly positive, performing better than the company's overall level. The supermarket channel experienced a certain decline in growth due to last year's high base and increase in the number of people returning to their hometowns.
New products such as cream have driven the recovery of bakery stores, supermarkets have maintained steady growth, new food and beverage retail sales have continued to grow at a high rate, and the company's growth plan for 24 years is still positive. In terms of revenue growth in 24, it is expected that new food and beverage retail > bakery > supermarkets. Specifically, in terms of catering and new retail channels, Tustin will continue to grow rapidly, Yum and others plan to continue to promote more new products, and tea is also expected to make new progress. Little B is cooperating with the distribution team to focus on strengthening the local hotel scene. It is expected that new food and beverage retail will continue to grow rapidly this year. In terms of cake shops, on the one hand, channel run-in dividends are gradually being released, and strategic adjustments are being implemented to support large merchants. On the other hand, new products such as cream and machined egg tarts continue to be introduced and expanded. By product, the price of imported cream is high due to factors such as the Red Sea crisis and overseas inflation. The company's South China factory plans to increase the cream production line during the year. The growth rate of the new whipped cream product is positive. At the same time, traditional products were further upgraded this year, and the 4.0 mechanism to imitate handmade egg tarts and doughnuts that absorb less oil are introduced. Contribute in certain increments. Meanwhile, in the supermarket channel, in the context of Sam's steady expansion of stores, the company already launched new products in early '24, and it is expected that the supermarket channel will maintain good and steady growth.
Proposed three “big” strategies in '24, improving resource allocation, deepening cost reduction and efficiency, and profitability is expected to recover throughout the year. The company proposed three “big” strategies this year. One is large single products, that is, new product development is more careful to increase the proportion of large single products; the second is large distributors. Last year's Q4 rebates laid a good foundation. This year's resources were fully skewed towards big merchants. The third is big customers, which focus on breaking through big restaurants and hotel customers, etc., in addition to large logistics and coordinated procurement to lock up orders. Currently, the prices of the main raw materials on the cost side are stable. At the same time, prices for fats and fats for cream have been locked in advance. In terms of costs, transportation costs have been reduced in terms of external warehouses and branch line transportation, personnel costs have been strengthened, investment in exhibitions at the headquarters level has been reduced in terms of promotion costs, and asset impairment losses have been reduced as much as possible, and expenses are invested in the same individual for binding assessments. In response to last year's profit pressure situation, relevant adjustments were implemented one after another in 24. Combined with the elimination of eventual disturbances such as one-time accrual of incentive expenses, the company's operating profit margin for the whole year is expected to improve to a high single digit.
Investment advice: The bakery is expected to improve, optimize efficiency, and maintain a “strong” rating. The company started the Spring Festival smoothly, with sufficient reserves on the product side and more efforts on the channel side. The revenue growth outlook for the whole year is positive. The profit level is more likely to release significant flexibility considering the continued deepening of cost reduction and efficiency. After the current valuation has declined, we can instead focus on subsequent opportunities for bakery supply chain leaders with stable core advantages to reverse their difficulties. We maintained the 23-year EPS forecast at 0.59 yuan, slightly adjusted the 24-25 EPS forecast to 1.77/2.42 yuan (the original forecast was 1.99/2.66 yuan). Referring to comparable company valuations and historical valuation centers, we gave 24-year profit 30 times PE, corresponding to a target market value of about 9 billion yuan/target price of 53 yuan, and maintained a “strong push” rating.
Risk factors: sluggish downstream demand; increased market competition; food safety issues, etc.