Core views:
24Q1 results exceeded expectations. 24Q1 revenue was 765 million yuan, up 46.40%; net profit attributable to mother was 103 million yuan, up 28.07%; net profit after deduction was 98 million yuan, up 30.63% from the same period.
Revenue: E-commerce exceeded expectations, Yungui and Shaanxi recovered, and the periphery continued. We expect that Sichuan and Chongqing will remain flat, affected by structural shortages; growth in Yungui and Shaanxi will accelerate, mainly to make up for the Q4 shortage problem; it is expected that in the future, Sichuan and Chongqing will accelerate and Yungui Shaanxi will slow down, and sales and revenue will increase steadily. We expect e-commerce + growth to accelerate. Douyin GMV will increase, the company will continue to be number one, and the leading effect will be obvious; Tmall JD will benefit from the spillover of power from Douyin and Pinxuan, iterative play, and optimization of product structures; future growth may be controlled but the growth trend will be maintained. The periphery continues to expand, and the benchmark market replicates experiences such as entering KA, cultivating shopping guides, and promotion activities, laying the foundation for major health products and product promotion, and continuing high growth.
Profit: Product structure improved, profits from various channels increased, and cost rate increases narrowed. Overall gross margin increased by 7.5 pct to 54.4% year on year, with free points increasing by 5.5 pct to 57.7%. It is expected that the price reduction of raw materials will contribute to a certain extent, and the share of health products with high gross margin has increased. Among them, we expect that the gross margins of Sichuan and Chongqing, Yungui, Shaanxi, e-commerce, and peripheral products will all rise significantly year over year. Compared to month, Sichuan and Chongqing will be affected by stock shortages, and Yungui Shaan/peripheral products will improve. The sales expense ratio increased by 11.6 pct to 34.4% year on year, and the increase narrowed slightly, down 4 pcts from month to month, based on scale effect+ improved marketing efficiency.
The management/R&D cost ratio decreased by 1.2/0.5 pct, which is related to the scale effect. The overall net profit margin also fell 1.9 pct, and the decline narrowed and improved month-on-month. The year-on-year decline was mainly due to the impact of business structure (high e-commerce and peripheral growth). In addition to seasonal fluctuations, the main reason for the month-on-month improvement was product structure optimization and cost control. Among them, the net interest rate of each channel showed a basic improvement trend compared to the previous month.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 3.1/3.9/480 million yuan, corresponding to a valuation of 30/23/19x. The industry is in a period of rapid growth, and the profit decline has narrowed to ease early concerns. The company is given a 24-year 30xPE valuation, corresponding to a reasonable value of 21.34 yuan/share, maintaining a “buy” rating.
Risk warning. Risks such as international environmental uncertainty, exchange rate fluctuations, and raw material price fluctuations.