Incident: The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 765 million yuan, +46.4% year-on-year, net profit to mother of 103 million yuan, +28.1% year-on-year, after deducting net profit of 98 million yuan, +30.6% year-on-year.
The share of revenue from mid-range and high-end products continues to increase, leading to an increase in gross margin. 24Q1's Freedom Point products achieved operating revenue of 701 million yuan, +54.6% year-on-year. Among them, high-end series products continued to account for an increase in revenue, leading to an increase in gross margin. The comprehensive gross margin of 24Q1 Company and the gross margin of Freedom Point products were 54.4% and 57.7%, respectively, +7.5 pct and +5.8 pct year-on-year, respectively. The company will continue to optimize the product structure, upgrade the iterative probiotic product line, and expand the advantages of probiotic products.
E-commerce and peripheral markets have maintained rapid growth. 24Q1's offline channels achieved revenue of 436 million yuan, +16.7% year over year, of which peripheral market revenue was +52.0% year over year; e-commerce channel revenue was 296 million yuan, +150.5% year over year. The rapid development of e-commerce channels has brought good brand spillover effects to offline channels, thus driving rapid breakthroughs in offline channels. While continuing to deeply cultivate the core markets of Sichuan, Chongqing, Yungui and Shaanxi, the company accelerates the pace of offline channel expansion in key peripheral regions, focuses on markets in Guangdong, Hunan, Hebei and other provinces, and continues to explore promising regions as key future development areas.
Sales expenses continued to be invested, and the expense ratio and net profit margin improved month-on-month. The company continued to strengthen brand building and increase marketing and brand promotion efforts. 24Q1 invested 263 million yuan in sales expenses, +120.7% year over year, sales expenses ratio 34.4%, +11.6pct year on year, -4.4pct month on month; management expenses ratio 2.7%, -1.2pct year on year, -0.2pct month on month; thanks to the release of revenue side scale effects and effective cost control, 24Q1 net profit margin increased 5.1 pct to 13.4% month-on-month.
Profit forecast and rating: We are optimistic that the company will actively expand its marketing network, steadily expanding from the five core provinces to the whole country, and improving product strength to drive product structure optimization. The company's net profit to mother for 2024-2026 is expected to be 310 million yuan, 380 million yuan, and 480 million yuan respectively. The corresponding PE is 26x/20x/16x, respectively, maintaining the “recommended” rating.
Risk warning: Channel expansion falls short of expectations, fluctuating raw material prices, increased industry competition, etc.