On April 23, 2024, the company released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved revenue of 3.482 billion yuan (YoY +39.80%), net profit attributable to mother of 664 million yuan (YoY +33.51%), and net profit of non-return to mother of 624 million yuan (+37.76% YoY).
Investment highlights:
The company's performance exceeded expectations. With 2024Q1, the company achieved revenue of 3.482 billion yuan (YoY +39.80%), net profit attributable to mother of 664 million yuan (YoY +33.51%), and net profit of non-attributable net profit of 624 million yuan (YoY +37.76%).
The second curve is showing strength, and the national layout continues to advance: by product, 2024Q1 continues to focus on the Guangdong market while actively exploring the national market. Sales of new products such as the 500ml Gold Bottle and Dongpeng Water Replenishment have continued to increase, driving the company's sales revenue and net profit to grow rapidly. The company's core product, Dongpeng Special Drink's sales revenue was 3.10 billion yuan, up 30.11% year on year; sales revenue of other beverages was 377 million yuan, up 257.01% year on year, accounting for an increase of 6.60 pct to 10.84% year on year. The second curve was sharp. Looking at the subregions, the 2024Q1 region achieved sales revenue of 2.143 billion yuan, a year-on-year increase of 51.21%, accounting for a year-on-year increase of 4.67 pcts to 61.62%, and the nationwide layout continues to advance. By channel, distribution/direct/online channels achieved revenue of 30.64/3.40/67 billion yuan respectively, an increase of 36.02%/73.47%/100.26%. As of the end of the first quarter of 2024, the number of company dealers was 2,912.
Profitability has declined, and the share of new products has increased, reducing gross profit margin. The gross margin of 2024Q1 decreased by 0.76 pct to 42.77% year on year, mainly due to the increase in the share of new products with low gross margin (gross margin of 17.25% of new products in 2023), while the net margin of 2024Q1 decreased by 0.89pct to 19.07% year on year.
The sales/management/R&D/finance cost rates were 17.11%/2.95%/0.32%/-1.29%, respectively, +1.43/-0.30/ -0.10/-1.06 pcts, respectively. The main reason for the increase in the sales expense ratio was the increase in freezer sales.
Profit forecasting and investment suggestions: The company invests in advertising to enhance brand reputation, and uses Guangdong as its base to cultivate channels while promoting a national development strategy to seize market share. Fully implement a multi-category product matrix strategy in the beverage sector and actively create a second growth curve. In its annual report, the company determined the operating target of more than 20% increase in revenue and net profit in 2024. We determined that the operating target will be achieved. We maintain our previous profit forecast. The company's net profit for 2024-2026 is 25.57/32.00/38.83 billion yuan, respectively, with earnings per share of 6.39/8.00/9.71 yuan/share, respectively. The PE corresponding to the closing price on April 22, 2024 is 31/24/20 times, respectively, maintaining the “increase in holdings” rating.
Risk factors: risk of nationalization falling short of expectations, risk of rising costs, risk of sales of core products falling short of expectations, food safety risks.