The 23-year stable operation, litigation settlement, incentive plan & three-year plan refers to 10 billion in 23 years' revenue/net profit deducted to mother of 51.4/1.70/5.2 billion, -3.8% YoY; 23Q4 revenue/net profit/deducted non-net profit of 11.9/2.97 billion, YoY -11.4%/+393.7%/-60.1%. Joint litigation and settlement with industry drives estimated liabilities to be reversed and included in non-operating income of $2,925 million. In addition, the 24-year equity incentive draft and Delicious Fresh's three-year strategic plan were released. The incentive plan assesses 24-26 company revenue/operating margin/ROE, 24-26 revenue CAGR 25%, operating profit margin not less than 15.0%/16.5%/18.0%, and ROE not less than 14%/15.5%/20%; in the three-year plan, Delicious Fresh's 26-year revenue target is 10 billion yuan, doubling over three years, and operating profit target of 1.5 billion yuan. We believe that the implementation of incentives and plans will strengthen the endogenous momentum of the company's reforms, and that development will rise to the next level, and that 10 billion dollars can be expected. EPS is expected to be 0.92/1.21/1.53 yuan in 24-26. Refer to the comparable company's 24-year average PE 36x (Wind agreed expectations), and the 24-year 36x PE is given, with a target price of 33.12 yuan, a “purchase”.
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Delicious Fresh's operation was stable in 23 years. The incentive plan and three-year plan helped the company buck the trend and take off in 23 years with revenue of 4.93/60 billion, -0.5%/+3.1% YoY. Among them, soy sauce/chicken powder/cooking oil/others were +0.1%/+13.4%/-10.6%/-6.8%, respectively. The new 23H2 leadership team focuses on promoting marketing reforms and personnel competition. Currently, core personnel are basically in place. The company issued a draft restricted stock incentive plan to grant 329 employees (7 Dong Gao and 322 other employees) 14.39 million shares (accounting for 1.83%) at a price of 14.19 yuan to assess the 24-26 year-on-year revenue growth rate of no less than 12%/18%/48%, operating profit (deduction) rate of not less than 15.0%/16.5%/18.0%, ROE not less than 14%/15.5%/20%, and the company's revenue/operating profit in '26 is not less than 100/1.8 billion (CAGR 25%/33%); delicious The three-year plan refers to revenue of 10 billion dollars and operating profit of 1.5 billion dollars in 26 years.
Cost improvements drive an increase in gross margin, and one-time expenses such as personnel optimization accrues short-term suppressed profit +1.0pct to 32.7% yoy (Yummy Fresh +1.9pct), 23Q4 gross margin +1.49pct to 33.1% yoy (Yummy Fresh +2.5pct), reduced soybean costs and product structure optimization (share of products with low gross margin such as cooking oil) led to an improvement in gross margin; in '23, Yummy Fresh's sales expense ratio -0.2 pct to 9.0% year on year (Q4 +0.7 pct year on year), 23 The reduction in annual job stabilization allowances led to a reduction in the rate; the management fee rate was +0.9 pct to 5.9% year over year (Q4 +5.0 pct year over year), and Q4 marketer optimization brought one-time compensation costs. The net interest rate of Delicious Fresh in 2023 was 12.1%, +0.4pct year on year (23Q4)
(YoY - 5.1 pct). Looking ahead to 24 years, profitability is expected to continue to increase due to improved cost pressure, SKU optimization, and continuous optimization of the company's production-side production efficiency and labor efficiency against leading companies.
The potential energy is rising, and the take-off is imminent, maintaining the “buy” rating
Equity incentives and the implementation of the three-year plan strengthen endogenous momentum, and are optimistic about the company's reforms and speeding up development. We raised our profit forecast. We expect EPS of 0.92/1.21 yuan for 24-25 (0.90/ 1.10 yuan), introduce EPS of 1.53 yuan for 26, target price of 33.12 yuan (previous time 28.80 yuan), and “buy”.
Risk warning: Food safety, fluctuating costs, market competition exceeding expectations.