Incidents:
The company released its 2023 annual report. In 2023, it achieved revenue of 2,065 billion yuan, +41.26% year-on-year, and realized net profit of 209 million yuan, +67.87% year-on-year, and realized net profit after deduction of 186 million yuan, or +64.48% year-on-year. It is proposed to pay 3 shares for every 10 shares, with a cash dividend of 134 million yuan, with a dividend rate of 64.06%.
The second curve of quail eggs is clear. Large packaging drives channel structure improvement. In 2023, the company achieved revenue of 2,065 billion yuan, +41.26%. Of these, 23Q4 achieved revenue of 572 million yuan, +26.51% year-on-year, and the Q4 revenue growth rate slowed, mainly due to disruptions during the Spring Festival period, and the company continued its rapid growth trend. In terms of product, fish products achieved revenue of 1,291 billion yuan, +25.87% year-on-year, continuing to consolidate the leading position. Focusing on cultivating the second-largest single product, quail eggs, surpassed 300 million yuan in 2023. According to the announcement, the current production capacity has been expanded to 16,000 tons, and there is still 8,000 tons of production capacity under construction, which will greatly ease production capacity bottlenecks, and it is expected that the volume will be further expanded as channel coverage increases. Actively create product lines such as “200 million grade” single product dried tofu and dried meat, and “100 million yuan grade” single product konjac to support the increase in the richness of categories. Looking at the product specification level, the company continues to promote the improvement of the BC, KA and other channel market layout and single point effort with large packaging+loose name specification expansion. In 2023, “big packaging+loose name” accounted for more than 50%. The expansion of large packaging also led to an increase in the company's channel structure and brand potential. Looking at the channel dimension, in addition to maintaining the advantages of the original traditional distribution channels, the company strengthened the layout of modern channels such as KA and CVS to create terminal display and promotion. The number of dealers at the end of the period increased by 790 to 3,057 over the same period, driving sales revenue +35.98% year over year to 1,666 billion yuan. Direct management achieved revenue of 399 million yuan, +68.52% year-on-year. The core growth came mainly from offline snack stores, Douyin and other channels.
Cost dividends combined with scale effects to free up profit margins
In 2023, the company achieved net profit of 209 million yuan, +67.82% year-on-year, and a net profit margin of 10.13%, +1.60pct year-on-year, mainly due to cost dividends such as dried anchovies, quail eggs, etc., and the release of scale effects after volume expansion. In 2023, the company's gross margin was 28.17%, +2.54 pct. As the company continues to improve the intelligent manufacturing level of production lines and lay out the upstream supply chain for anchovies and quail eggs, it is expected to drive a further increase in gross margin. In 2023, the company's sales expense ratio was 10.76%, which remained relatively stable at +0.09pct year on year. The management expense ratio was 4.04%, and -0.44pct year on year, showing a certain scale effect.
Product channels grow on two wheels, and supply chain optimization is expected to free up profit margins. The company is driven by product+channel two-wheel drive, and the overall performance stability is stronger. At the product level, the company has reached the leading level in the spicy braised fish category. The second curve of quail eggs is clear. In the future, the company's advantages in the spicy marinated fish category are expected to empower other categories. At the channel level, the company uses large packaging and loose specifications to drive channel structure upgrading and brand potential, and brand potential energy is the key for large single product companies to break through long-term growth bottlenecks. The company started from a distribution channel, and the net interest rate was relatively low compared to interbank production companies, but the company continued to deepen the upstream supply chain layout, build an anchovy processing subsidiary in Kenya, and promote the development of the quail egg supply chain. Continued technical improvements on the production side led to an increase in the level of automation and intelligence, and supply chain optimization is expected to release long-term profit margins.
Investment advice:
We expect the company's 2024-2026 revenue growth rates to be 31.1%, 24.4%, and 19.2%, respectively, and net profit growth rates of 38.8%, 28.4%, and 27.3% respectively. We are optimistic about the growth brought about by the company's quail egg release, large packaging, and long-term growth potential brought about by increased brand potential. We give Buy-A an investment rating. The target price for 6 months is 18.05 yuan, which is equivalent to a dynamic price-earnings ratio of 28X in 2024.
Risk warning: Product promotion falls short of expectations, channel expansion falls short of expectations, and market competition intensifies.