Brief performance review
On March 30, the company released its annual report. In 2023, it achieved revenue of 5.139 billion yuan, -3.78% year on year; realized net profit attributable to mother of 1,697 million yuan, +386.53% year over year; realized net profit after deduction of 524 million yuan, -5.79% year on year. In 23Q4, we achieved revenue of 1,186 billion yuan, -14.37% year over year; realized net profit of 2,969 billion yuan, +393.72% year over year; realized net profit of 61 million yuan without return to mother, -60.02% year over year, and surpassed the previous forecast center.
At the same time, the 2024 restricted stock incentive draft was announced. It is proposed to award a total of 329 middle and senior management and core business (technical) executives at 14.19 yuan per share, no more than 14.388 million shares. The share unlocked in 24/25/26 is 30%/35%/35%. The assessment conditions include both profit and revenue. Based on year 23, 24-26 revenue growth rate was not less than 12%/32%/95%; operating margin was not less than 15%/16.5%/18%; return on net assets was not less than 14%/15.5%/20%.
Management analysis
During the Q4 pain adjustment period, the main business was clearly under pressure. 1) Condiments/real estate/other achieved annual revenue of 48.66/1.55/ 0.44 billion yuan respectively, -0.5%/-33.9%/-48.0% year-on-year. Condiment performance is steady, and other industries have been hit hard by weak demand. 2) 23Q4 Soy Sauce/Chicken Essence Chicken Powder/Cooking Oil/Others -17.3%/+18.1%/-18.7%/-21.1% respectively. The decline is due to misplaced preparations for the Spring Festival. Combined, the internal organizational structure is in the adjustment stage, which affects the enthusiasm of sales staff and dealers in the short term. 3) Subregion, 23Q4 East/South/Midwest/North -15.5%/-6.1%/-6.2%/-43.9% YoY. The sharp decline in the east and north is due to intense market competition and a decrease in the number of superimposed dealers. At the end of the period, the total number of dealers in the company was 2,084, an increase of 81 compared to '22.
Profit margins recovered steadily throughout the year, and Q4 expense calculations were slightly disrupted. The net interest rate for tasty food in '23/23Q4 was 11.4%/9.9%, +0.4pct/-2.6pct year-on-year. Q4 Low profit margins result in one-time accrual of personnel compensation, litigation costs, consulting fees, etc., and the sales/management rates during the period were +0.7/+5.8 pct. The gross margin of the main condiment business in '23 was 32.2% (+2.0pct year on year), mainly benefiting from declining costs of various raw materials, freight, etc.
Performance pressure was concentrated, and 24 young people joined the battle. The company will focus on the main condiment business, compounding the expansion of the empty market, and revenue is expected to resume double-digit growth. On the profit side, after the new management is in place, supply chain optimization and performance reform are actively promoted. Early organizational efficiency was low, and subsequent net interest rates are expected to catch up with peers.
Profit Forecasts, Valuations, and Ratings
The company's net profit for 24-26 is estimated to be 7.6/9.9/1.28 billion yuan, respectively, -56%/+30%/+30% over the same period last year. The corresponding PE is 27x/21x/16x, respectively, maintaining the “buy” rating.
Risk warning
Food safety risks; market competition exacerbates risks; internal reforms fall short of expectations