Incidents. On March 25, 2024, the company disclosed its 2023 annual report. In 2023, the company achieved revenue of 7.115 billion yuan (YOY -2.45%), achieved net profit attributable to mother 220 million yuan (YOY 69.85%), and realized net profit of 102 million yuan (YOY 148.72%) after deducting non-return to mother.
Revenue declined slightly, and profitability increased significantly. On the gross profit side of revenue, the company's revenue in '23 fell 2.45% year on year, and gross margin fell 3.41 pct year on year, so gross profit fell 14.91% year on year. However, overall cost control was good. The cost ratio for the period decreased by 4.52 pct year on year (of which the sales expense ratio decreased by 3.62 pct and the management expense ratio decreased by 0.69 pct), so total profit increased 56.43% year on year (corresponding total profit margin increased by 1.66 pct year on year). Furthermore, it benefited from a 5.70 pct year-on-year reduction in the income tax rate, and the net profit to the mother increased by 69.85% year on year (corresponding increase of 1.32 pct in the net profit margin to mother).
The “high-end cost performance” strategy drives the new growth base market. At the end of 2022, the company took the lead in proposing a “high-end cost performance” strategy in the industry, and after a year, relied on the new “high-end cost performance” strategy to help the company get out of the difficult cycle. Starting in the second half of 2023, the company quickly bucked the trend in the third and fourth quarters of 23, with a total contribution increase of more than 1 billion yuan, laying a solid foundation for the significant growth of the 2024 trade season. Through a series of internal and external changes, the company has basically achieved a new “all-category, omni-channel” basic model of sustainable growth.
With nuts as the core category, all snack products are being upgraded at an accelerated pace. Nuts are the company's core category, ranking first in the online market share. During the New Year Festival, the rapid growth of various channels achieved a year-on-year increase in overall revenue of more than 60%. Among them, the “Nut Gift” online market share exceeded 35%. In '23, the company's daily nuts, nut packs, macadamia nuts and dozens of other products ranked in the TOP1 category lists on Douyin and Tmall. At the same time, since March 2023, under the guidance of “high-end cost performance”, the company has accelerated the launch of all snack products, and launched more than 1,000 SKUs. Among them, various new products such as spicy braised gift packs, quail eggs, shakima, and cod sausage rank in the TOP1 category corresponding to Douyin.
With the omni-channel layout of “Dike+N”, Douyin's performance is outstanding. The company made every effort to adjust the channel structure and initially formed a “Shake+N” omni-channel collaboration system, which can form efficient and fast response product matches based on different channels. (1) On the online side, the company's third-party e-commerce platform had revenue of 4.951 billion yuan, accounting for 69.59% of total revenue. Among them, the Douyin platform achieved revenue of 1,204 billion yuan (YOY 118.51%). (2) On the offline side, the company is guided by “high-end cost performance”, restructured the offline store system, created its own brand community snack shop, and centrally optimized the original offline store type. Offline distribution revenue in '23 was 1,641 million yuan; community snack shop revenue was 92 million yuan; the total revenue of the original store model was 266 million yuan.
Lay out independent manufacturing of nut categories, and supply chain capacity continues to improve. The company has fully entered the independent manufacturing process of the nut category, built an automated production line upgrade with “gift packs, daily nuts, macadamia nuts, pecans, pistachios”, etc., and built a joint venture production line with the world's top 500 Aolan International. At the same time, it penetrated into raw material production areas with independent manufacturing as a key point, such as setting up purchasing points in Guangxi, Yunnan, etc., and launched the “Gold Medal” nut company, the world's largest cranberry farm, the world's largest pistachio farm, and the world's largest pecan farm Full cooperation. We believe that the improvement of the company's full-link supply chain capabilities will continue to support the development of high-end cost performance strategies.
Profit forecasting and investment advice. We expect the company's revenue for 2024-2026 to be 100.64/126.43/14.802 billion yuan, and net profit to mother will be 343/511/693 million yuan, respectively, and the corresponding EPS will be 0.86/1.27/1.73 yuan/share, respectively. Combined with the valuation of A-shares comparable companies, the company was given a PE (2024E) valuation range of 27-32 times, with a corresponding reasonable value range of 23.22-27.52 yuan, giving it a “superior to the market” rating.
Risk warning. (1) Market demand declined, (2) channel expansion fell short of expectations, (3) new product launches fell short of expectations, and (4) food safety issues.