Key points of investment:
Incident: The company released its 2023 annual report. During the reporting period, the company achieved revenue of 7.11 billion yuan, a decrease of 2.4%; net profit to mother was 220 million yuan, an increase of 69.9%. It is estimated that 23Q4 achieved revenue of 2.53 billion yuan, an increase of 29.2%; realized net profit of 50 million yuan to mother, an increase of 41.1%. Consistent with previous performance forecasts, in line with market expectations. The dividend plan is to pay 2.51 yuan in cash (tax included) for every 10 shares, and the dividend rate is 45.57%.
Investment rating and valuation: Considering the company's implementation of a high-end cost performance strategy to benefit consumers, the gross margin is expected to be pressured, profit forecasts for 25-26 years were added, and net profit forecasts for 24-26 years were predicted to be 3.23, 4.22, and 547 million yuan (436 million yuan in the previous 24 years), with year-on-year growth rates of 47%, 31%, and 30%. The corresponding EPS was 080, 1.05, and 1.36 yuan (1.09 yuan 24 years ago), respectively. 22. 17x, the company predicts net profit CAGR of 30% for 24-26, based on PEG=1, with a target market value of 9.7 billion yuan in 2024. There is still room for 6% increase from the closing price on March 28, 2024, maintaining an increase in holdings rating. The company has created an “omni-channel+all-category” business model. The online channel uses Douyin as a starting point to create a large single product around short video e-commerce volume to empower all channels. Offline channels focus on distribution business and drive steady growth of daily sales products. Community snack stores focus on Zhejiang Province and cooperate with leading mass sales companies to spread all over the country.
The Douyin channel is growing at an impressive rate, and the distribution channel is showing steady performance. On a quarterly basis, 23Q1-Q4 achieved revenue of 1.90 billion/ 990 million/1.69 billion/ 2.53 billion, respectively, of -38.5%/-3.1%/+38.6%/+29.2% year-on-year, respectively. The company implemented a “high-end cost performance” strategy, and revenue in 23Q3 changed year-on-year. Among them, 23Q4 revenue increased by nearly 600 million dollars. We judge that the increase was due to the rapid development of the Douyin channel, the recovery of integrated e-commerce, the excellent performance of offline distribution channels during the New Year holidays, and the growth of the sub-brand Little Deer Blue. By channel, online channels achieved revenue of 4.951 billion yuan in '23, an increase of 3.4%. Among them, Tmall, JD, and Douyin achieved revenue of 1,738 billion/ 1,197 billion/ 1.24 billion respectively, or -12%/-31%/119% year-on-year, respectively. Offline channels, distribution/community snack store/original store type achieved revenue of 1,641 million/92 million/266 million respectively. Among them, the distribution business also increased 11%, and the performance was steady. The original store model declined significantly due to store adjustments. By the end of '23, the company had 149 community snack stores and 266 original store types.
Optimize cost allocation and improve profitability. The company achieved a gross profit margin of 23.3% in '23, a year-on-year decrease of 3.4 pcts. Among them, 23Q4 achieved a gross profit margin of 20.8%, a year-on-year decrease of 3.7 pcts. The company implemented a high-end cost performance route, which led to a decline in gross margin.
Sales/management/R&D/finance expenses for 23 years were 17.4%/3.2%/0.4%/0.1%, respectively, -3.6 pct/-0.7 pct/-0.2 pct/+0.0 pct, respectively. Among them, 23Q4 sales/management/R&D/finance expenses were 16.3%/2.6%/0.2%/0.1%, respectively, -0.4pct/-1.8pct/-0.3pct/-0.2pct, respectively. The company controlled promotion fees and platform service fees, and the sales expenses rate dropped significantly. Thanks to cost ratio optimization, the company's profitability has been restored. In '23, the company achieved a net interest rate of 3.1%, an increase of 1.3 pct over the previous year. Among them, 23Q4 achieved a net profit margin of 2.0%, an increase of 0.2 pct over the previous year.
Adhere to “high-end cost performance” as the overall strategy and set a 24-year revenue target of 10 billion dollars. On the product side, the company continues to consolidate the main nut category and focus on selecting a number of large snack items; on the channel side, the company has built a “shak+N” omni-channel collaboration system to continuously create large single products through the content attributes of short video e-commerce to empower all channels; in addition to the three main squirrel brands, the brand side has become strong sub-brands, Xiaolu Blue, and Fawn Blue Blue, have achieved annual sales of over 500 million dollars, and turned losses into profits in 23Q4. The company strengthened the differentiated positioning of Xiaolu Blue children's snacks. Omni-channel penetration. Since then, the company has room to improve its profitability through large-scale procurement of upstream raw materials, increasing the proportion of independent manufacturing, logistics optimization, and improving the efficiency of enterprise back-office management.
Stock price performance catalyst: revenue growth exceeds expectations, competitive landscape improvement Core hypothetical risks: online competition pattern intensifies, store expansion falls short of expectations, food safety issues