Incident: The company released its 2024 quarterly report: 2024Q1 achieved revenue of 354 million yuan, +10.74% year on year; net profit to mother of 40 million yuan, -3.43% year over year; deducted non-net profit of 38 million yuan, +87.07% year over year.
The store business grew steadily, and group meals accelerated in 24Q1. The 24Q1 franchise sales/direct store sales/group meal channel sales achieved revenue of 2.58/0.06/083 million yuan respectively, +8.3%/-8.0%/+20.9% over the same period last year. 1) Store business: By the end of 2024Q1, the number of the company's franchised stores reached 5094, a net increase of 51 over the end of 2023, including 203 new stores and a decrease of 152 stores. The 24Q1 store opening rate is slower than in the same period last year. Considering the high closing rate last year, the company will maintain a more cautious pace of opening stores this year, aiming to open 1,000 stores throughout the year. The average single store revenue of franchised stores declined by a small single digit in 24Q1. 2) Group meal business: Revenue is accelerating, and it is expected to contribute more to the accelerated growth of the group meal business in foreign ports.
2024Q1 deducts 10.66% non-net interest rate, and overall profitability is stable. The company's net interest rate for the 24Q1 quarter was 11.20%, -1.64pct year on year; after deducting non-net interest rate of 10.66%, +4.35pct year on year. Of these, 24Q1 achieved a gross profit margin of 25.92%, +1.72pct year over year. The cost side 24Q1 quarterly sales/management/R&D/finance expense rates were 5.01%/8.52%/0.90%/-2.53%, respectively, -2.27/ -2.02/+0.04/+0.48pct. The sharp increase in deducted non-net interest rates is mainly due to the low capacity utilization base of production capacity released at the new factory in Nanjing during the same period last year, compounded by the overall low level of raw materials, and a significant increase in gross margin; at the same time, declining share payment fees and shrinking promotional expenses led to a decrease in the cost rate during the period. The month-on-month decline was mainly due to the impact of the Spring Festival on fixed amortization, personnel costs, etc., and overall profitability was stable? “Steamed Whole Flavors” is expected to be combined in 24Q2, and Babi's influence in the East China market will further strengthen. According to the company's annual report, the company successfully reached a strategic investment cooperation with the dominant local breakfast chain brand “Steamed Full Flavor” in Nanjing in September 2023. “Steamed Full Flavor” has about 170+ stores. The company will acquire 51% of its shares and complete the financial statement merger in the second quarter of 2024. This will increase the company's market share in the East China market, the capacity utilization rate of the Nanjing factory, and consolidate the company's position in the East China market.
It is expected that after the merger is completed, the company will be more careful to flop and maintain profit stability.
Profit forecasting and investment rating: C-end stores and B-side group meal businesses are working in tandem to drive the company to open up long-term space. According to the company's latest performance, adjust the company's profit forecast, and consider that the company's revenue for 2024-2026 is 18.9/21.5/2.40 billion yuan (the previous forecast was 18.9/2.21 billion yuan for 2024-2025), +15.7%/13.8%/12.0% year over year; net profit to mother is 234/2.71 billion yuan, respectively (the previous forecast for 2024-2025 was 2.46/291 million yuan), +9.4%/+18.1%/+12.4% year-on-year, EPS is 0.93/1.10/1.24 yuan respectively, corresponding to the current PE being 17x, 15x, and 13x, maintaining the “buy” rating.
Risk warning: Competition in the breakfast industry intensifies, store expansion and sales fall short of expectations, large fluctuations in raw material prices, and food safety risks.