On 2024/03/15, Youyou Foods released its 2023 Annual Report.
Key points of investment
Performance is under slight pressure, and rising raw material costs reduce profits
In 2023, total revenue was 966 million yuan (same decrease of 6%), net profit attributable to mother was 116 million yuan (same decrease of 24%), after deducting non-net profit of 89 million yuan (same decrease of 37%). Among them, the total revenue for 2023Q4 was 207 million yuan (same decrease of 28%), mainly due to the high base due to early preparation for the Spring Festival in the same period last year. Net profit of 10 million yuan (same decrease of 80%) was deducted from non-net profit of 0.000 million yuan (same decrease of 100%). Overall performance was under pressure, and the upward trend on the cost side reduced profit margins. On the profit side, gross margin/net margin in 2023 were 29.37%/12.02%, respectively; 2023Q4 gross margin/net margin was 24.77%/4.87%, respectively, -10pct/-12pct year on year. Chicken claw prices remained high during the same period in 2023. Subsequent companies considered using low prices for inventory storage. On the cost side, the sales expense rate/management expense ratio in 2023 was 12.22%/5.06%, respectively, +3pct/+0.5pct; the 2023Q4 sales expense rate/management expense ratio was 14.84%/8.16%, respectively, +6pct/+5pct, respectively. The increase in sales expenses was mainly due to the company increasing brand promotion efforts while increasing the introduction of promotional materials to increase related transportation costs. Net cash flow from operating activities in 2023 - $0.4 billion (same decrease of 102%) was due to an increase in cash payments for the purchase of raw materials and a decrease in cash received from sales of goods.
▌The offline channel layout is gradually being consolidated. Product price increases are dealing with cost pressure by product. In 2023, pickled pepper, chicken wings, dried tofu, peanuts/other revenue was 7.22/0.78/0.54/0.39/0.25/0.15/0.26 billion yuan, respectively, -8%/0.2%/11%/-9%/-2%/-11%/2%/2%/2%/2%/2%. By channel, online/offline revenue in 2023 was 0.22/938 million yuan, -18%/-6% year-on-year. The total number of dealers at the end of 2023 was 666, a net increase of 77 over the beginning of the year. The company continued to consolidate the offline market by increasing the number of dealers. Looking at the subregions, revenue for Southwest China/East/Northwest/ South China/ North China/ Central China/ Northeast China in 2023 was 5.13/2.65/0.54/0.45/0.38/0.28/ 0.16 billion yuan, respectively, -9%/3%/-23%/29%/-28%/-3%/7%. Looking at the volume and price breakdown, the sales volume of pickled pepper, pork skin crystals, bamboo shoots, chicken wings, dried beans, and peanuts is
1.47/0.20/0.23/0.05/0.11/0.07 million tons, -18%/0.2%/12%/-11%/-11%/-11%, respectively, the tonnage prices were
4.91/3.96/2.32/8.07/2.23/22,900 yuan/ton, compared with 12%/-0.1%/1%/0.1%/0.1%, respectively. The tonnage price of most products remained stable. Among them, the tonnage price of pickled pepper and chicken claws increased dramatically, mainly due to the company making price increases in response to rising costs. It is expected that after the cost falls, the company will continue to explore the market by increasing the cost investment.
Profit forecasting
We are optimistic that the company will consolidate its basic market and continue to build a second growth curve. EPS is expected to be 0.33/0.37/0.42 yuan respectively in 2024-2026, and the current stock price is 23/20/18 times PE, respectively, maintaining a “buy” investment rating.
Risk warning
Macroeconomic downturn risks, new product promotion falling short of expectations, risk of rising raw materials, growth of large products falling short of expectations, etc.