Incident: The company released its 2024 quarterly report. In 24Q1, it achieved operating income of 3.482 billion yuan, +39.80% year over year; net profit to mother of 664 million yuan, +33.51% year over year; net profit after deducting non-return to mother of 624 million yuan, +37.76% year over year.
Income side: Energy drinks are off to a good start, and hydration is gaining momentum. The 24Q1 company achieved revenue of 3.482 billion yuan, +39.80% year-on-year. Looking at the spin-off product structure, Dongpeng Special Drink/Other Drinks achieved revenue of 31.01/377 billion yuan respectively in 24Q1, or +30.11%/+257.01% over the same period last year. By region, Guangdong region/East China/Central China/North China/Southwest China/Guangxi region/ achieved revenue of 9.21/5.01/5.32/4.35/3.89/286 million yuan respectively in 24Q1, +9.45%/+48.05%/+54.45%/+95.40%/+69.14%/+1.57%. The company's revenue in the first quarter was high. On the one hand, basic energy drinks had a good start and steady pace, and on the other hand, the second curve growth rate was impressive. 24Q1 hydration and big names achieved revenue of 241 million yuan, accounting for 6.92% (5.11% for the full year of '23, up 1.81 pcts from month to month).
On the profit side, freezer expenses affected net interest rates in a single quarter, and profitability continued to increase steadily throughout the year. The 24Q1 company achieved gross profit margin of 42.77%, -0.76pcts year on year; achieved a net profit margin of 19.07%, or -0.89pcts year on year. In terms of expenses, the 24Q1 company's sales/management/ financial expense ratios were 17.12%/2.96%/-1.29%, respectively, with year-on-year changes of +1.42/-0.29/-1.05 pcts, respectively. The decline in the company's net interest rate is mainly due to the fact that the gross margin of new products was slightly lower, which had an impact. Second, the cost investment in a single quarter was high. Expenses were invested in channels such as freezers and displays before the peak season.
Investment advice: Digitalization enables the company to grow, and the secondary curve can be viewed from the front line. 1) Main business: Increase channel concentration, and continue to increase the development of mailers and second-batch merchants, the growth of outlets, and the improvement of individual sales efforts.
2) Nationalization: The Southwest China and North China markets have formed high growth potential and continue to increase market cultivation outside the province; 3) New products: Formulate a strategic framework with electrolyte drinks, tea drinks, pre-prepared alcohol, and ready-to-drink coffee as the second development curve. Under digital system construction, national supply chain construction and channel system construction, the company continues to give full play to its advantages of high cost performance and strong channel power, and the main business and second curve continue to develop. The company is expected to achieve revenue of 144/182/22.6 billion yuan in 2024-2026, +28%/24% year over year; net profit to mother of 27.35/4.4 billion yuan, +33%/28%/26% year over year, corresponding to PE 29/22/18x, maintaining a “buy” rating.
Risk warning: Food safety risks, fluctuating raw material prices, new products falling short of expectations.