The 2023 performance was in line with expectations, and the incentive draft was officially launched
The company's 2023 revenue/net profit attributable to mother was 51.4/1.70 billion yuan (-3.8% YoY), condiments/real estate revenue -0.5%/-42.0% YoY; profit reversal is mainly due to the expected return of debt. 2023Q4 revenue/net profit to mother was 11.9/2.97 billion yuan (-14.4% YoY/reversal loss), in line with expectations. The company introduced a restricted stock incentive plan (draft): it is proposed to grant no more than 14.388 million restricted shares at a price of 14.19 yuan/share (accounting for 1.83% of the total share capital). The conditions for lifting the sales restrictions are based on 2023. The revenue growth rate for 2024-2026 will not be less than 12%/32%/95%, the operating profit margin will not be less than 15%/16.5%/18%, and the ROE will not be less than 14%/15.5%/20%. Based on the company's endogenous growth, considering equity incentive costs and management efficiency improvements, we forecast 2024-2026 net profit of 7.5 (-0.1) /9.7 (+0.6) /1.23 billion yuan (+26.9%), EPS of 0.96 (-0.01) /1.23 (+0.08) /1.56 yuan. The current stock price corresponds to PE28.9/22.6/17.8 times. Consider encouraging the launch of employees to increase their enthusiasm and raise it to a “buy” rating.
Channel development progressed steadily, and internal management adjustments had a short-term impact on 2023Q4 performance 2023Q4 condiment business revenue -13.6% year-on-year, while soy sauce/chicken powder, cooking oil/other revenue changed -17.3%/+18.1%/-18.7%/-21.1% year-on-year, respectively. The significant decline in 2023Q4 revenue was mainly due to the short-term impact of the Spring Festival backorder movement compounded by internal management adjustments. There was a net increase of 81 dealers in 2023, and the development rates of districts, counties and prefecture-level cities were 72.2%/94.4%, respectively (+4.1pct/+0.9pct compared to the same period).
Cost reduction+structural optimization, gradual improvement in profitability
In 2023, the company's gross margin of condiments was +2.0pct year-on-year to 32.2%, mainly due to cost reduction combined with product structure optimization. The 2023/2023Q4 Delicious Fresh Net Interest Rate was 12.1%/7.9% (+0.4pct/-5.2pct year on year). The sharp year-on-year decline in 2023Q4 was mainly due to a marked increase in management expenses. The 2023Q4 Delicious Fresh Management Expense Ratio was +5.4pct year over year, mainly due to the increase in expenses such as labor relationship compensation and consulting fees.
Long-term outlook: Endogenous growth+epitaxial mergers and acquisitions to advance the three-year strategic goal. According to Delicious Fresh's strategic plan for the next three years, Delicious Fresh's revenue/operating profit targets for 2026 are 10/15 billion yuan, respectively. We expect the company to achieve steady endogenous growth while increasing its share through epitaxial mergers and acquisitions.
Risk warning: risk of raw material price fluctuations, food safety incidents, and reform progress falling short of expectations.