Introduction to this report:
Revenue increased steadily and profits increased significantly in 2023. The company strengthened brand building, new product investment and channel diversification, and continued to consolidate its leading segment advantage, which is expected to further enhance its competitiveness.
Summary:
Maintain an “Overweight” rating. Taking into account changes in the company's brand launch and channel structure, the 2024-2025 EPS was slightly reduced to $0.43 (-0.06) and $0.51 (-0.08), giving 2026 EPS of 0.59 yuan. The target price remained at 7.84 yuan, corresponding to HK$8.52 (1HKD = 0.92 CNY).
The performance was in line with expectations. The company's revenue in 2023 was 4.87 billion yuan, +5.2% year on year, gross profit of 2.32 billion yuan, +18.5% year on year. The sales expenses ratio increased by 2.9 pct year on year to 16.5%, mainly due to increased brand investment, net profit to mother of 800 million yuan, +481.9% year over year. While the revenue side grew steadily, the profit side increased significantly. 2H23's revenue was 2.54 billion yuan, +7.3% year over year, gross profit of 1.22 billion yuan, +10.8% year on year, net profit to mother 430 million yuan, +5.1% year on year. The company's total dividend payout ratio for the full year of 2023 reached approximately 90%.
Vegetable products are growing rapidly, and new channels are being developed. In 2023, the revenue of seasoned noodle products was -6.2% year-on-year, mainly due to product restructuring and a decline in traditional channel traffic. As the company actively promotes the layout of emerging channels and further increases the volume of new products, the revenue of seasoned noodle products is expected to improve in 2024. Revenue from vegetable products in 2023 was +25.1% year-on-year, thanks to the company actively capturing consumer demand and actively promoting new products and expanding production capacity. In terms of revenue share, in terms of categories, the company's share of seasoned noodle products and vegetable products tends to be more balanced; in terms of channels, mass sales and e-commerce channels are gradually being developed, and the regions are relatively balanced. East China, central China, and South China are still the top three regions.
The launch of new products is accelerating, and the categories continue to expand. After optimizing the product structure, the company increased brand investment, and the online e-commerce platform operated steadily and invested in the construction of content e-commerce starting in 2023; at the same time, offline marketing and promotion continued to gain strength. The launch of new products accelerated significantly, and continued to be introduced in 2023, not only extending the existing main product line (Overbearing Panda and Little Witch), but also expanding into expanded new categories (flamboyant flames). While innovating product categories, the company also responds positively to channel demand to provide customized products, and controls the impact of channel structure changes on gross profit through customized value chains.
Risk warning: New product promotion falls short of expectations, channel competition intensifies, and structural adjustment transmission is weak.