The sharp rise in overseas business volume has driven a sharp increase in profit, and profitability continued to be optimized, maintaining the company's revenue/net profit of 37.47/233 million yuan in 2023, +15.37%/+120.12%, of which 2023Q4 revenue/net profit to mother was 10.35/56 billion yuan, +28.44%/+748.55% year-on-year. 2024Q1 revenue/net profit to mother was 888/56 million yuan, +24.42%/+259.00% year-on-year. The high increase in profit was mainly due to a recovery in overseas sales and an increase in the gross margin of overseas factories. We maintain the 2024-2025 profit forecast and add the 2026 profit forecast. We expect net profit to be 2.95/3.49/412 million yuan for 2024-2026, EPS of 1.00/1.19/1.40 yuan, respectively. The current stock price corresponds to PE of 24.2/20.4/17.3 times, respectively, maintaining a “buy” rating.
Product structure optimization combined cost reduction and efficiency, and the company's profitability greatly increased the company's gross sales margin/net sales margin by 26.28%/7.79% in 2023, +6.49pct/+4.07pct. Product structure optimization, supply chain efficiency improvement, and enhanced cost control led to a significant increase in profitability. 2024Q1 gross margin of sales/net sales margin of 27.85%/7.41%, +3.50pct, sales/management/R&D/financial expense ratio 10.38%/5.10%/1.68%/0.66%. Among them, the sales expense ratio +0.71pct is mainly due to the company's advance layout in April, and the pace of marketing expenses investment is ahead of schedule. It is expected that marketing expenses will remain stable throughout the year, and the financial expenses ratio -0.99 pct year on year will reduce exchange losses.
Domestic consumption restructuring has driven a high increase in staple food sales. A variety of new staple food products helped the company layout the track (1) Domestic consumption trends drive a high increase in staple food sales. In 2023, snacks/canned/staple food revenue was 23.51/6.35/ 577 million yuan, +9.81%/+5.76%/+60.23%, gross profit margin 25.39%/32.62%/29.06%, and +6.82pct/+6.21pct/+8.61pct. The sharp increase in staple food sales was mainly due to the restructuring of domestic pet food consumption. (2) Multiple brands help the company lay out the staple food circuit. Wanpy launched a variety of dry and wet food products, such as native energy dog staple food cans and raw bone and meat double food. Among them, raw bone and meat double cat food won the “Innovative Product of the Year Award” in the 2023 Pet New Domestic Cat Food category. The Tmall flagship store sold over 80,000 cans during the ZEAL 0 staple food can 618, ranking in the top 2 of the Tmall dog canned food sales list. Double 11 had sales exceeding 4 million yuan, rising to the top 2 on the Tmall dog pre-sale list.
Sales in overseas markets are strong, and strong growth of middle and high-end brands opens up profit space in 2023 domestic/overseas revenue of 10.81/2,533 billion yuan, +20.15%/+12.89% year-on-year, gross profit margin of 31.28%/25.22%, +3.51 pct/+7.97 pct year-on-year. Wanpy, ZEAL, GREAT JACK'S are exported to 61 countries and regions. Among them, the high-end brand ZEAL is growing strongly in the US, Canada, New Zealand, Australia, etc. In June 2023, ZEAL and GREAT JACK'S officially entered 156 PetSmart stores in Canada, marking a new breakthrough in sales for their brands in the North American market.
Risk warning: Prices of raw materials (chicken breast) fluctuate, production capacity expansion falls short of expectations, etc.