Incidents:
The Yanjin store released the 2023 annual report and the performance forecast for the first quarter of 2024.
In 2023, the company achieved operating income of 4.115 billion yuan, an increase of 42.22%; net profit attributable to shareholders of listed companies was 506 million yuan, an increase of 67.76% year on year, and net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 476 million yuan, an increase of 72.84% year on year.
In the first quarter of 2024, the company achieved net profit attributable to shareholders of listed companies of 150 million yuan to 170 million yuan, an increase of 34.48%-52.41% year on year, and net profit after deducting non-recurring profit and loss of 130 million yuan to 150 million yuan, an increase of 32.18%-52.51% year on year.
Opinions:
The company's products focus on seven major categories, and combine “channel penetration” and “category brand” strategies to achieve rapid growth in performance. In terms of products, spicy brine snacks/casual baking/deep-sea snacks/deep-sea snacks/potato snacks/dried nuts/konjac jelly pudding accounted for 36%/15%/9%/8%/6%/5% of revenue, respectively, with corresponding growth rates of 57%/13%/11%/30%/595%/37%/126%, respectively. The product system is rich and complete, making it easy for the company to adopt a variety of differentiated combinations to meet consumer demand and reduce the risk of market fluctuations in a single variety. In 2024, the company will continue to focus on casual konjac and quail egg products, while also promoting products such as konjac jelly pudding. The above categories are expected to continue to grow at a high rate. In terms of channels, the company focuses on developing e-commerce, snack mass stores, CVS, campus stores, etc., and has in-depth cooperation with Snack Busy, Zhao Yiming, and Snack Youming. In 2023, the company's direct channels/distribution and other channels/e-commerce channels accounted for 8%/72%/20% respectively, corresponding to a growth rate of -10%/40%/98%. The e-commerce channel growth rate was impressive. On the brand side, while owning the main brand of “Shiotsu Shop”, the company has launched brand matrices such as Konjac Vegetarian Belly “Big Devil”, the healthy egg snack “Egg King”, the deep-sea snack brand “31° Fresh,” the casual baking brand “Bean Dad,” the konjac jelly brand “Konjac Full Score”, and the potato snack brand “Potato Confusion,” and the brand's influence continues to grow.
In 2023, the net profit margin increased 1.9 pcts year-on-year, and the company's profitability increased. In terms of gross margin, the company's gross profit margin was 33.5% in 2023, down 1.2 pcts from the previous year. We expect this is due to changes in the channel share structure and the increase in revenue share of snack sales channels and e-commerce channels with low gross margins. In terms of cost ratio, sales expense rate/management expense rate/financial expense rate/R&D expense ratio was 12.5%/4.4%/0.4%/1.9%, with a year-on-year change of -3.3pcts/-0.1pcts/+0.1pcts/-0.6pcts. Apart from the increase in financial expenses, everything else showed a downward trend. The company size effect was prominent, and cost control was more refined.
In terms of net interest rate, the company's net interest rate in 2023 was 12.3%, up 1.9 pcts year-on-year, and profitability increased significantly.
Profit forecast and investment rating: Looking ahead to 2024, we are optimistic that the company has the ability to create explosive products, and will continue to benefit from the rapid growth of mass snack sales channels, and continuous improvement in product, channel, and brand potential.
The company's net profit for 2024-2026 is estimated to be 670 million yuan/870 million yuan/1.16 billion yuan, respectively. The corresponding PE is 22X/17X/13X, covered for the first time, giving it a “buy” rating.
Risk warning: Food safety risks, the growth rate of channels such as mass sales of snacks and Douyin e-commerce falls short of expectations, increased risk of industry competition, falling short of expectations in the promotion of new products, risk of fluctuating prices of upstream raw materials, etc.