Exports were repaired, staple foods were impressive, and 24Q1 profits exceeded expectations
The company achieved a net loss of 1.09 million yuan to the mother in 2023 due to overseas customer inventory losses. Among them, the revenue and gross margin of chewing gum and snack series products, which are widely used for export, declined year on year, while staple food and wet food products benefited from domestic market development to achieve both year-on-year increases in revenue and gross margin. The company's 24Q1 profit performance exceeded expectations, which may indicate that the brand strength of the company's own brand has been further verified. Considering that the company's overseas customers may have entered the inventory replenishment cycle, we raised the company's 24-year net profit forecast to 154 million yuan (previous value: 134 million yuan), basically maintained the 25-year net profit forecast at 180 million yuan, and added a 26-year net profit forecast of 230 million yuan. The company was given 30 XPE for 24 years, corresponding to a target price of 18.3 yuan, maintaining a “buy” rating.
Overseas customer transfers dragged down the company's profit in 2023. With outstanding performance in staple foods and wet food, the company achieved operating income of 1.41 billion yuan in 2023, a year-on-year decrease of 18.5%. The net loss to mother was 1.09 million yuan. The gross margin was 19.3%, a year-on-year decrease of 2.97 pcts. Capacity utilization was insufficient due to the decline in export orders in the first three quarters of 2023 or the main reason for the change in gross margin in 2023. The company's domestic business developed steadily: in 2023, it achieved revenue of 350 million yuan, an increase of 26.95% year on year, and gross margin of 26.8%, +0.11 pct year on year. By category, the company's average revenue and gross margin declined year-on-year due to overseas customer withdrawals, while staple foods and wet food products benefited from the steady development of the domestic market and achieved year-on-year growth in both revenue and gross margin. In 2023, this portion achieved revenue of 210 million yuan, an increase of 14.9% year on year; gross margin was 20.05%, up 1.49 pct year on year.
24Q1 achieved net profit of 41.71 million yuan, reversing losses year on year, exceeding expectations. The company achieved operating income of 384 million yuan, +142% year over year, in line with our previous operating income expectations of 320 million yuan to 420 million yuan. Among them, it is estimated that overseas revenue will increase by 3 digits year on year, and domestic revenue may grow by 26% to 47%; 24Q1 achieved net profit of 41.17 million yuan, which is higher than our previous expectations of 0.1 to 0.3 million yuan. The company's gross margin reached 24.4% in 2024Q1, +10.3pct year over year, up 0.36pct month-on-month. The background or side of the year-on-year and month-on-month optimization of gross margin verified the company's increase in the brand strength of domestic brands such as “Juefeast” and “Haoshijia”, as well as the recovery of export orders as scheduled. Looking ahead to Q2, we expect that the low base effect of the company's profit may still exist, and we need to pay attention to the volume of new products from brands such as Juedian and Haoshijia in the 618 promotion.
Target price of 18.3 yuan, maintaining “buy” rating
Considering that the company's overseas customers may have entered the inventory replenishment cycle, we raised the company's 2024 net profit forecast to 154 million yuan (previous value: 134 million yuan), basically maintained the company's net profit forecast of 180 million yuan in 2025, and added 230 million yuan of net profit forecast for 2026. Referring to the company's 24-year average valuation value of 25.58XPE, considering the company's excellent domestic business performance, we gave the company 30 times PE in 2024, corresponding to a target price of 18.3 yuan, maintaining the “buy” rating.
Risk warning: Domestic consumption growth falls short of expectations/domestic pet breeding falls short of expectations/independent brand building falls short of expectations/raw material prices fluctuate greatly, etc.