Incident: The company released its 2024 quarterly report. During the reporting period, the company achieved revenue of 3,646 billion yuan, an increase of 91.83%; realized net profit of 308 million yuan, an increase of 60.80%; and realized deducted non-net profit of 263 million yuan, an increase of 92.84%. The performance exceeded expectations.
Investment rating and valuation: Considering that the company achieved an increase in profit level through full-link cost optimization, the profit forecast was raised, and it is predicted that the company will achieve net profit of 3.56, 4.63, and 592 million yuan in 24-26 years (323, 4.22, and 547 million yuan before 24-26), with year-on-year growth rates of 62%, 30%, and 28%, corresponding EPS of 0.89, 1.16, and 1.48 yuan (0.80, 1.05, and 1.36 yuan in 24-26 years), the latest closing prices correspond to 24-26 PE, respectively 26, 20, 15x Maintain an increase in holdings rating. The company has created an “omni-channel+all-category” business model. The online channel uses Douyin as a starting point to create a large single product around short video e-commerce volume to empower all channels. Offline channels focus on distribution business and drive steady growth of daily sales products. Community snack stores focus on Zhejiang Province and cooperate with leading mass sales companies to spread all over the country.
The results of the reform in 2023+ are popular in omnichannel sales, and 24Q1 revenue increased. The company adheres to the “high-end cost performance” strategy. Revenue has continued to grow since 23Q2. 24Q1 revenue nearly doubled, basically reaching 21Q1 revenue level for the same period.
We judge that the increase is mainly due to the rapid development of the Douyin channel, the recovery of integrated e-commerce, and the excellent performance of offline distribution channels during the New Year holidays. The 24Q1 short video e-commerce platform's revenue exceeded 1 billion, and its share of revenue increased dramatically. The company uses the brand power of short video content to promote omni-channel development. Nut gift boxes and series products continued to be popular during the New Year Festival.
Gross margin stabilized under the new “one product, one chain” supply chain system. 24Q1 achieved gross profit margin of 27.4%, a year-on-year decrease of 0.87pct. The company has implemented a high-end cost performance route, and gross margin has declined slightly, but we expect the gross margin of the core categories to remain stable. 24Q1 sales/management/R&D/finance expenses were 16.3%/1.3%/0.1%/0.1%, respectively, compared with +1.1 pct/-1.9 pct/-0.2 pct/+0.0pct, respectively. The increase in the sales expense ratio was mainly due to the lower base for the same period last year. The 23Q2-24Q1 sales expense ratio was 21.1%/19.3%/16.3%/16.3%, respectively. The company controlled promotion fees and platform service fees, and the sales expense ratio continued to improve month-on-month. The company effectively reduces management expenses through the “integration of quality and sales” collaborative organization.
Additionally, the company received 55 million in government grants (70 million in the same period last year). Overall, the company achieved a net profit margin of 8.46%, a year-on-year decrease of 1.63 pct.
Stock price performance catalyst: revenue growth exceeds expectations, competitive landscape improves
Core hypothetical risks: Online competition intensifies, store expansion falls short of expectations, food safety issues