Performance summary: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved revenue of 770 million yuan, +46.4% year on year; realized net profit of 100 million yuan, +28.1% year on year; realized net profit of 100 million yuan after deduction, +30.6% year over year. Q1 revenue and profit exceeded expectations. Revenue increased by more than 30% in a single quarter for 4 consecutive quarters, and growth momentum continued.
Gross margin continues to be optimized, and marketing promotion remains high. The gross margin of 24Q1 was 54.4%, +7.5pp compared to the same period. Benefiting from the continuous increase in the share of the company's high-margin single products such as probiotics, the gross margin continued to improve. The total cost ratio was 39%, +9.8pp year on year. The company maintained investment in brand promotion, e-commerce promotion, etc., and the sales expenses rate increased rapidly. 24Q1 company's sales expenses rate was 34.4%, +11.6pp; management expenses rate was 2.7%, -1.2pp; financial expenses ratio was -0.1%, -0.1pp; R&D expenses rate was 2%, -0.5pp year on year. Taken together, the company achieved a net interest rate of 13.4% in 24Q1, a year-on-year basis of -1.9pp. The 24Q1 net margin was superior to the full year of 2023. As the company's e-commerce channels and brand strength in peripheral provinces stabilize, the repurchase rate increases, and the efficiency of the company's sales expenses investment is optimized, profitability is expected to gradually rise.
The Freestyle brand is growing rapidly, and the product structure continues to be optimized. 24Q1's Freedom Point brand achieved revenue of 700 million yuan, +54.6% year-on-year. In the first quarter, the company continued to increase its marketing efforts for the middle and high-end series of products. The revenue share of the Big Health series products, mainly probiotics, increased relatively rapidly in e-commerce channels and peripheral provinces, driving up customer unit prices and gross margins. In 2024, the company will further upgrade the probiotic series products, enhance product strength, and form the brand potential of the Big Health series. As the company continues to iterate on large single products, its product strength is expected to boost e-commerce channels and the expansion of brand power in peripheral provinces.
E-commerce channels have maintained impressive growth, and online and offline synergy effects continue to show. 2024Q1's offline channels achieved revenue of 4.4 billion yuan, +16.7% year-on-year. Among them, revenue from provinces outside the core region increased 52% over the same period last year, and the pace of expansion in peripheral provinces accelerated; the 2024Q1 e-commerce channel achieved revenue of 300 million yuan, +150.5% over the same period last year. The e-commerce channel maintained rapid growth. Among them, various channels such as Douyin, Tmall, and Pinduoduo all grew by more than three digits. By focusing on brand promotion and traffic acquisition through the Douyin channel, the company's brand awareness continues to increase, and spills over to other e-commerce platforms to increase transactions, forming a synergy effect between e-commerce platforms. The repurchase rate is steadily increasing, and the brand power is gradually stabilizing. As the company's brand potential increases, e-commerce channels are expected to empower offline, helping offline channel construction and new customer acquisition in peripheral provinces.
Profit forecasting and investment advice. EPS is expected to be 0.72 yuan, 0.93 yuan, and 1.18 yuan respectively in 2024-2026, and the corresponding PE is 25 times, 20 times, and 16 times, respectively. Considering the continuous optimization of the company's product structure, the steady pace of regional expansion, e-commerce channels have maintained high growth, and maintained a “buy” rating.
Risk warning: Risks such as increased competition in the industry, large fluctuations in raw material prices, and new product development falling short of expectations.