Brief performance review
On March 22, the company announced results, achieving revenue of 4.87 billion yuan, +5.2% year on year; net profit to mother of 800 million yuan, +481.9% year on year; adjusted net profit of 970 million yuan, +6.3% year over year. Among them, 23H2 achieved revenue of 2.54 billion yuan, +7.3% year on year; realized net profit of 430 million yuan, +5.1% year on year; and adjusted net profit of 4.7 billion yuan, -3.0% year on year.
Management analysis
Vegetable products are growing rapidly, and new channels are being fully embraced. 1) By product, sales of noodles/vegetables/soy products and other products in '23 were 25.5/2.2/20 billion yuan, respectively, or -6.2%/+25.1%/-7.4% compared with the same period last year. Influenced by price increases and active product structure optimization, sales of noodle products are still under pressure. The volume is -17% in 23 years, and the price is +13%. Among vegetable products, konjac remained high, leading to a recovery in H2 sales. Annual volume was +31%, price -5%, and soybean skin declined significantly in other categories. 2) Both offline/online channel sales increased 5% year over year in '23. Among them, online content e-commerce channels have been added, and emerging channels such as leading offline snack franchises (covering 20,000 stores+ stores by the end of 2023), and O2O. The pressure on traditional channels is due to a decline in traffic and the company's active adjustment of product specifications, but the quality of outlets has been further improved, and the average number of SKUs at terminal sales points has increased under the sales support model.
The product structure continues to be optimized, and the rate has increased due to the promotion of new products. The gross margin of the 23/23H2 company was 47.7%/47.8%, respectively, and +5.4pct/1.5pct year-on-year, respectively. The continuous improvement in gross margin is 1) Changes in product structure. The gross margin of vegetable products increased to 51.3% in 23 years, and the share of revenue increased to 43.5%. 2) Prices of core raw materials such as flour and fats declined month-on-month. 3) The company actively optimizes the supply chain and improves production efficiency. The sales rate/management rate was +2.9 pct/-1.0 pct year on year, respectively. The year-on-year increase in sales rates was due to an increase in advertising expenses (210 million yuan for the whole year, +54% year over year), compounded by an increase in sales staff salary expenses. The reduction in management fees is due to a reduction in the costs associated with listing.
The dividend rate has increased, and changes are actively promoted, and steady recovery is expected in 24 years. At the same time, the company announced that it would distribute a special dividend of 0.11 yuan per share in '23. The annual dividend rate was raised to 90%, and the dividend rate was greater than 6%. The company will continue to embrace all channels such as content e-commerce, snack sales, KA/CVS, etc., and continue to work hard on new products. 23H2 is expected to expand new sub-brands such as Overbearing Panda, Little Witch, and Fragile Fire in 24 years. We are still optimistic about the company's first-mover advantage on the brand side, and it is expected that all categories will resume growth in 24 years.
Profit Forecasts, Valuations, and Ratings
Taking into account the pressure on terminal demand, we lowered our 24-25 profit forecast by 13%/11%.
The net profit for 24-26 is estimated to be 10.3/11.9/1.36 billion yuan respectively, up +17%/15%/15% year-on-year. The corresponding PE is 12x/11x/9x, respectively, maintaining the “buy” rating.
Risk warning
Risks such as food safety risks; new product releases falling short of expectations; increased market competition.