Core views

Since 2023, the company has been adhering to the overall strategy of “high-end cost performance”, adhering to the “all-category, omni-channel” business model, firmly establishing the “manufacturing private brand retailer” business model, using “national snacks and national good prices” as the overall brand positioning, giving full play to its innovative genetic advantages, and continuously moving towards the mission of “popularizing nuts and good snacks to the public”. In 2024, the company's overall goal is to “return to 10 billion dollars and become stronger across the board”, strengthen a number of large single products through “one product, one chain”, strengthen omni-channel collaboration, and “integrate product and marketing” to strengthen the new organization. We believe that the company promptly adapts to the changing trends of the times, promotes the optimization and upgrading of the company's supply chain, improves management efficiency, and is expected to strengthen the company's competitive barriers and achieve continuous growth.

occurrences

The company released its report for the first quarter of 2024

2024Q1 achieved revenue of 3.646 billion yuan, +91.83% year over year; realized net profit of 308 million yuan, +60.80% year over year; realized net profit without deduction of 263 million yuan, +92.84% year on year.

Brief review

The high-end cost performance strategy is remarkable, and the 2024 results are off to a good start

The promotion of the “high-end cost performance” strategy in 2023 caused the company's revenue to grow against the trend in the third and fourth quarters, and the Douyin channel continued to grow rapidly. The company's 24Q1 continued the results of the transformation in 2023. Driven by the overall strategy of “high-end cost performance”, the new “one product, one chain” supply system made terminal products more cost-effective, but the gross margin of the core category remained stable; short video revenue was achieved through “shak+N”, which led to a significant increase in omnichannel sales growth.

During the New Year's Festival, the rapid growth of various channels achieved an overall revenue increase of more than 60%. Among them, the “nut gift” online market share exceeded 35%, and various new products such as spicy braised gift packs, quail eggs, shakima, and cod sausage ranked in the TOP1 corresponding category on Douyin. The company has built a world-leading nut distribution factory with a high equipment automation rate and active layout of independent manufacturing plants. Daily nut, macadamia nut, pecan nut and other factories have been put into operation. Relying on the overall scale and manufacturing advantages under construction, it has the ability to integrate the entire industry chain from sales to production to raw materials. In addition, the company continued to focus on distribution, adding smart gift packages to be sold on all channels during the New Year Festival, driving the company's Q1 revenue to increase 91.8% to 3.646 billion yuan, setting the tone for “returning to 10 billion dollars” in annual revenue.

The decline in gross margin is manageable, and cost ratio optimization releases profits

On the profit side, 24Q1 gross profit margin was 27.40%, down 0.87 pcts year on year. The decline in gross margin was significantly narrower than in Q4 (gross profit margin of 20.77% in 23Q4, down 3.78 pcts year on year). The 24Q1 sales/management expense ratio was 16.26%/1.33%, respectively, compared with +1.08pct/-1.86pct. The increase in sales expenses is expected to be mainly due to higher marketing expenses due to the Spring Festival misalignment. The company's management expenses have dropped significantly, mainly due to the “integration of quality and sales” collaborative organization to effectively reduce the management cost rate. The company's 2024Q1 net interest rate was 1.63pc to 8.46% year on year, mainly due to a year-on-year decrease of 15.64 million yuan in government subsidies, +0.04pct to 7.22% year-on-year, and a steady increase in profitability. It is expected that there is still room for reduction in the company's expense ratio under scale effect+efficiency optimization throughout the year.

High-end cost performance results have been shown, and a return of 10 billion dollars can be expected in 2024

Since 2023, the company has been adhering to the overall strategy of “high-end cost performance”, adhering to the “all-category, omni-channel” business model, firmly establishing the “manufacturing private brand retailer” business model, using “national snacks and national good prices” as the overall brand positioning, giving full play to its innovative genetic advantages, and continuously moving towards the mission of “popularizing nuts and good snacks to the public”. In 2024, the company's overall goal is to “return to 10 billion dollars and become stronger across the board”, strengthen a number of large single products through “one product, one chain”, strengthen omni-channel collaboration, and “integrate product and marketing” to strengthen the new organization. We believe that the company promptly adapts to the changing trends of the times, promotes the optimization and upgrading of the company's supply chain, improves management efficiency, and is expected to strengthen the company's competitive barriers and achieve continuous growth.

Profit forecast and investment advice: 2024 is the first year to show the results of the company's reform. We expect the company's revenue for 2024/2025/2026 to be 101.62/123.38/14.781 billion yuan, up 43%/21%/20% year on year, and net profit of 333/4.68/623 million, respectively, up 52%/40%/33% year on year, giving it a “buy” rating.

Risk warning:

1. The performance of the single product matrix did not meet expectations: the single product matrix launched by the company may not be loved by consumers, affecting the promotion of high-end cost performance strategies; 2. Online channel performance falls short of expectations: The company accounts for a relatively high share of online revenue. If there is fierce competition in the industry in the future, the company's revenue performance may fall short of expectations. If expenses increase, the company's profit performance may fall short of expectations; 3. Offline distribution or community retail business development falls short of expectations: In 2024, the company innovated its business model and focused on developing offline distribution business. If the offline business falls short of expectations, it may affect the company's revenue performance;

4. Risk of declining consumer spending power: residents' desire to buy optional foods has declined, household purchases of snacks have decreased, or small-brand products in counties, townships, and low-tier cities are once again popular due to low prices;