1Q24 results are in line with our expectations
The company announced 1Q24 results: 1Q24's revenue was 354 million yuan, up 10.74% year on year; net profit to mother was 40 million yuan, down 3.43% year on year; net profit after deducting non-return to mother was 38 million yuan, up 87.07% year on year. The results were in line with our expectations.
Development trends
The off-season stores expanded steadily, and the growth rate of group meal revenue improved. 1Q24's franchise/group meal channel revenue was +8.3%/+20.9%, respectively. 1) Stores: Compared with the beginning of the year, the number of franchised stores was 203, a net increase of 51 to 5094, with a net increase of 3/53/5/0 in East China/South China/North China/Central China respectively; 2) Single stores:
1Q24 single-store revenue also fell 2.1%. We expect single-store revenue in East China to be stable year-on-year, and the rate of opening stores outside East China, where single-store revenue is lower than the overall decline in single-store revenue; 3) Group meals: 1Q24 group meal revenue recovered relatively well. We expect this to be related to the company's continued development of major direct customers. Furthermore, maintaining a high increase in group meal revenue outside of East China also contributed by 2.0ppt to 23.5% year-on-year.
The off-season scale effect affects gross profit margins, after deducting the recovery of non-net interest rates. In 1Q24, the company's net profit margin after deduction increased 4.3ppt to 10.7% year-on-year, returning to normal levels. Among them, 1Q24 gross margin increased by 1.7 ppt and decreased by 1.1 ppt to 25.9% month over month, mainly due to reduced scale effects in the off-season; 1Q24 sales expenses rate decreased by 2.3 ppt to 5.0% year over year, mainly due to higher rapid store opening expenses in the same period last year and the return to normal sales in 1Q24; management expenses decreased by 2.0ppt year on year due to a reduction in management expenses of 3.85 million yuan, mainly due to the year-on-year decrease in the amount accrued in share payment fees and the impact of management efficiency improvement.
2024 outlook: Maintain rapid store opening, improve the growth rate of group meal revenue, and increase profitability. 1) Stores: As the national layout of production capacity continues to be implemented, the company opens up new markets such as Hunan, Anhui, and Lianyungang. The company's annual report reveals that the 2024 store opening target is progressing steadily on the basis of 1000 companies, and plans to achieve the acquisition and merger of the Nanjing “Steamed Whole Taste” brand in 2Q24 (proposed to acquire 51% shares); 2) Single store: Single store revenue (same region) has improved steadily since 1Q24. The company will continue to promote new products+vigorous dinner+targeted support for fine management of stores. The company's revenue from single stores in the same region is expected to improve in 4 years; 3) Group meals: as The company focuses on developing new retail and other channels, as well as trial and error promotion of pre-made dishes. We expect group meal channel revenue to resume double-digit year-on-year growth. On the profit side, we expect profitability to increase due to lower raw material prices, scale effects, and year-on-year improvements in sales expenses.
Profit forecasting and valuation
We maintain the company's 2024/2025 revenue forecast of 1,88/2.16 billion yuan, and maintain the 2024/2025 net profit forecast of 241/268 million yuan. The current stock price was traded at 16.8/15.1 times P/E valuation in 2024/2025. We maintain the target share price of 19.20 yuan/share unchanged, corresponding to the 2024/2025 19.9/17.9 times P/E valuation, which has 18.6% upside compared to the current stock price. Maintain outperforming industry ratings.
risks
Store expansion, single-store revenue recovery, group meal expansion fell short of expectations, raw material prices fluctuated, and food safety.