The company announced 2023 results: in 2023, the company's revenue was 5.139 billion yuan, -3.78%; net profit to mother was 1,697 million yuan, +386.53% year over year; net profit after deducting non-return to mother was 524 million yuan, -5.79% year over year. The 23Q4 company's revenue was 1,186 billion yuan, -14.37% year-on-year, net profit to mother was 2,969 million yuan, +394% year-on-year, and net profit after deducting non-return to mother was 61 million yuan, -60% year-on-year. Among them, the 23-year revenue/net profit of the Delicious Fresh subsidiary was 49.32/599 million yuan, respectively, -0.5%/+3.04% year-on-year. The results are in line with previous forecasts.
Demand for soy sauce is resilient, and internal reforms brought short-term fluctuations in 23Q4: the company's soy sauce/chicken powder/edible oil revenue in 2023 was +0.09%/+13.44%/-10.62%, respectively, split volume price, soy sauce/chicken powder sales in 2023 were +1.9%/+15.7%/-9.6%, respectively, and tonnage price was -1.7%/-2%/-1.1%, respectively. Demand for soy sauce was resilient, and chicken powder sales increased rapidly due to B-side penetration. The 23Q4 company's soy sauce/chicken powder/cooking oil/other revenue was -17.3%/+18.1%/-18.7%/-21.1%, respectively, and revenue in the east/southern/midwester/northern regions was -16%/-6%/-44%, respectively. Weak revenue is expected to be mainly due to short-term adjustments on the sales side due to distributors' staggered preparation and internal reforms during the late Spring Festival. The number of distributors in the 23Q4 East/South/Midwest/North was -4/-7/+6/-21, respectively.
Cost dividends drive gross margin improvement, with pre-cost suppression of 23Q4 net interest rate: in 2023, the company's overall gross profit margin of the condiment business was 32.7%/32.2%, +1/+1.97pct year on year. Among them, the gross margin of soy sauce/chicken powder and edible oil was +2.6/-3.3pct year on year. The decline in raw material prices and product structure optimization drove the improvement of the company's gross margin. The direct material cost for soy sauce/chicken powder was -6.6%/-6.4%, respectively. The company's sales/management expense ratio in '23 was +0.04/+1.3 pct year on year, and the 23Q4 sales/management expense ratio was +0.7/+5.8pct year on year. The high increase in management expenses was mainly due to organizational changes affecting the phased increase in expenses such as compensation for the termination of labor relationships and consulting fees. Taken together, the net interest rate of the company withheld from non-return mother in '23/23Q4 was 10.2%/5.2%, -0.2/-5.9pct; the net interest rate of the subsidiary Delicious Fresh in '23 was 12.1%, +0.4pct year on year, and the profitability of the main condiment business was relatively stable.
Equity Incentive+Delicious Fresh's three-year plan has been implemented, and the new kitchen bank can be expected to be recreated in three years: the company announced the 2024 restricted stock incentive plan to grant 14.388 million shares to 329 employees, accounting for 1.83% of the total share capital, with a grant price of 14.19 yuan/share. The performance assessment requirements are the target revenue of 57.6/67.8/10.0.2 billion yuan for 2024-2026, an increase of 12%/17.86%/47.73%, operating profit margin of not less than 15%/16.5%/18%, respectively, and return on net assets of not less than 14%, respectively /15.5%/20% In addition, the company announced a strategic plan for the next three years. The business goal is for Delicious Fresh to reach 10 billion yuan in revenue and 1.5 billion yuan in operating profit by 2026. We believe that the current equity incentive and Delicious Fresh's three-year plan require both revenue and profit, demonstrating the company's confidence in long-term development. In the future, with the release of internal reform dividends, the company can be expected to rebuild a new kitchen state for another three years.
Profit forecast and investment rating: The company is in line with expectations in 23, without considering mergers and acquisitions. We adjusted the company's revenue forecast for 24-26 to $58/68/80 billion (previously 24-25 year forecast was 60/6.9 billion yuan), +12%/+18% YoY, and adjusted 24-26 net profit forecast of 7.4/9.4/1.25 billion yuan (previous 24-25 year forecast was 77/980 million yuan), -57%/+33% YoY. Among them, the net profit of Delicious Fresh Harvest was 7.3/9.4/1.25 billion yuan, respectively, +31%/+28%/+33% compared with the same period last year. We expect the company's net profit to be 28/22/17x for 24-26, respectively. The valuation is at a historically low level in the company's history, maintaining a “buy” rating.
Risk warning: the price of raw materials has risen sharply; the competitive pattern of the industry has deteriorated; improvements in corporate governance have fallen short of expectations; food safety issues