Key points of investment
The company's 24Q1 performance exceeded market expectations. Driven by the “high-end cost performance” overall strategy, terminal products were more cost-effective through the new “one product, one chain” supply system, but the gross margin of the core category remained stable; achieved a significant increase in short video revenue and share through “shaking+N” to drive omni-channel sales growth and continue to focus on distribution; and effectively reduce management rates through “integrated product and marketing” collaborative organization; combined with smart product packages sold in all channels during the New Year Festival, achieving both revenue and profit growth.
After deducting non-net profit in 24Q1, the revenue side achieved a high increase of 2024Q1. The company achieved revenue of 3,646 billion yuan, an increase of 91.83% year on year; realized net profit to mother of 308 million yuan, an increase of 60.80% year on year; realized deducted non-net profit of 263 million yuan, an increase of 92.84% year on year, and the performance growth rate exceeded market expectations.
Gross net profit margin declined slightly, with little change after deducting non-net interest
The company's gross margin declined slightly, mainly due to slight price adjustments under the high-end cost performance strategy, but the gross margin of core categories remained stable. The gross margin of 24Q1 sales was 27.40%, a year-on-year decrease of 0.87 pct.
In terms of the cost ratio, the management fee rate dropped significantly, achieving a decrease of 1.33%; the sales expense ratio increased by 1.08pct to 16.26%, mainly due to an increase in marketing expenses during the New Year Festival; R&D expenses did not change much, achieving 0.15%; and the financial expense ratio was 0.06%, a decrease of 0.02pct.
The 2024Q1 net interest rate was 8.46%, -1.63pct year over year; after deducting the non-net interest rate, it increased 0.04pct to 7.22%.
Adhere to the high-end cost performance strategy and return to the 10 billion target
The company proposed the goal of returning to 10 billion dollars in 2024, using high-end cost performance as a strategy to achieve an all-category and omni-channel business model through continuous transformation from the inside out. The product side uses “one product, one chain” as the core to strengthen a number of large single products; the channel side uses “Shake+N” collaboration to strengthen omni-channel; the organizational side uses “integration of product and marketing” as the core to improve operational efficiency; in addition to the three squirrels of the main brand, the brand side strengthens the sub-brand Fawn Blue and Blue. We believe that the company's current reforms cannot be singled out as channel and product reforms, but rather internal supply chain changes led by high-quality channels. By reshaping the distribution efficiency of consumers throughout the supply chain, profit overflow is achieved, and this portion of profit is transferred to consumers, thereby achieving high quality and cost performance and building a competitive advantage. Through omni-channel+full-category external display, we have achieved continuous growth in the future.
Maintain the previous profit forecast and maintain the buying rating
Maintaining the previous profit forecast, we expect the company's 2024-2026 revenue to be 101.63/131.31/16.012 billion yuan, respectively, 42.9%/29.2%/21.9% year on year; net profit to mother will be 3.53/4.70/ 595 million yuan, respectively, 60.7%/33.2%/26.4% year on year, corresponding PE 26/19/15 times, respectively.
Risk warning: Food safety risks, channel expansion falling short of expectations, development of large single products falling short of expectations, etc.