Introduction to this report:
The company's 2024Q1 performance exceeded expectations, and e-commerce channels and offline peripheral provinces continued to grow rapidly. It is expected that as production capacity constraints gradually ease, the scale effect will gradually be released, further driving the increase in profitability.
Key points of investment:
Conclusion: The company's 2024Q1 performance exceeded expectations. It is optimistic that the product structure will continue to be upgraded and that peripheral provinces will accelerate expansion, maintain the 2024-2026 EPS forecast of 0.70/0.81/0.99 yuan, maintain the target price of 21.67 yuan, and maintain the “gain” rating.
Incident: The company announced its results for the first quarter of 2024. 2024Q1 achieved revenue of 765 million yuan/ +46.40%, realized net profit of 103 million yuan/ +28.07%, and realized net profit of 98 million yuan/ +30.63% after deducting non-return to mother. 2024Q1 net profit margin 13.41%/YoY -1.98pct/ month-on-month +5.05pct. The year-on-year decline in net interest rates was mainly due to a sharp increase of +120.72% year-on-year sales expenses. The Q1 sales expense ratio was 34.42%, +11.59pct/month-on-month -4.35pct. Along with the increase in revenue scale and repurchase rate, profits are expected to improve after the scale effect is released.
E-commerce is growing strongly, and outlying provinces continue to grow at a high rate. The 2024Q1 e-commerce channel achieved revenue of 296 million yuan/ +150.50%, and the offline channel achieved revenue of 436 million yuan/ +16.70%, with revenue in peripheral provinces +52.00% year-on-year. I am optimistic that subsequent refinement of e-commerce structures and playstyle upgrades will drive multi-polarized revenue growth.
Production capacity constraints are gradually easing, and efforts are being made to actively sell through multiple channels. We analyzed that first-quarter results that exceeded expectations were mainly due to reduced shortages and active sales. The problem of tight production capacity of the probiotic series was gradually alleviated. After being out of stock in the early stages and reissued, the increase in the proportion of high-value products led to a high increase in performance. E-commerce platforms continue to increase rapidly, and executives in offline channels are sinking into first-line self-marketing. 2024Q1 Free Point's revenue was 701 million yuan/ +54.60%, and the gross profit margin was 57.70% /+5.80pct. The increase in the share of high-end products led the company to reach 54.36% of Q1 gross margin, +7.50pct/month-on-month +1.16pct.
Risk warning: industry competition squeezes profits; product innovation is imitated by peers.