Introduction to this report:
The performance was in line with expectations. The gap area expanded rapidly into a bright spot. Looking at endogenous extension in the long term, Delicious Fresh is expected to successfully achieve the goals of 10 billion dollars in revenue and 1.5 billion in operating profit in 2026.
Key points of investment:
Maintain an “Overweight” rating. In the context of mergers and acquisitions, due to continued weakness in overall demand, the company's 2024-2025 EPS forecast was lowered to 0.96/1.23 yuan, -56%/+29% (previous values were 1.01/1.27 yuan, respectively), giving the company 2026 EPS 1.61 yuan, +31% year over year, maintaining a target price of 33.33 yuan, and maintaining a “gain” rating.
The performance was in line with expectations, and the accelerated expansion of the blank market became a highlight. In 2023, it achieved revenue/net profit/net profit of 51/17.5 billion yuan, -3.8/+387/ -5.8%; Q4 achieved 12/30/ 0.6 billion yuan in a single quarter, respectively, -14/+394/ -60% year on year; in 2023, the company further strengthened its expansion into the empty market, so the development rate of the company's districts and counties reached 72.24% at the end of 2023, an increase of 4.12 pcts year on year.
Management fee ratios increased, hedging costs declined, and profitability remained essentially flat. Gross margin in 2023 was +1pct year on year, mainly due to lower prices of raw materials such as soybeans and additives, and deducted non-net interest rate of -0.21pct year over year. The decline was mainly due to the increase in compensation expenses for termination of labor relationships due to significant optimization of internal teams by the new management, so the management expense ratio was +1.28 pct year over year.
Equity incentives have been implemented, and high-quality development can be expected. The company plans to introduce a restricted stock incentive plan for 329 middle and senior core executives, accounting for 1.83% of the company's total share capital. The equity incentive plan emphasizes the expansion of revenue scale while taking into account the improvement of business quality. We believe that the company will show the characteristics of high-quality development in the future. Considering that the company currently has huge room for nationalization, we are optimistic about the company's future endogenous outreach efforts to successfully achieve Delicious Fresh's goal of 10 billion dollars in revenue and 1.5 billion in operating profit in 2026.
Risk warning: Management optimization falls short of expectations; lawsuits affect net profit, etc.