Incident: The company released its 2024 quarterly report on April 22. 24Q1 achieved operating income of 3.482 billion yuan, +39.80%; net profit attributable 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; contract debt at the end of the first quarter of '24 was 2,688 billion yuan, an increase of 80 million yuan over the end of 23. The revenue reservoir is rich, and there is sufficient spare capacity for performance. In terms of cash flow: 24Q1, the company received 4,096 billion yuan in cash from sales of goods and services, compared with 39.13%. The repayment growth rate was in sync with revenue. Dealers were willing to pay and the quality of performance was good; net cash flow from the company's operating activities was 860 million yuan, an increase of 18.72% over the previous year.
The share of new products has increased significantly, and the construction of market channels outside Guangdong continues to advance. By product, 24Q1 Dongpeng Special Drink/Other Drinks achieved revenue of 31.01/377 billion yuan respectively, +30.11%/+257.01% year-on-year, accounting for 89.16%/10.84%. Dongpeng Specialty Drinks, which accounts for 89.16% of revenue, is still the basic market. The share of revenue from other beverages increased significantly, from 4.24% in 23Q1 to 10.84% in 24Q1, of which the total revenue of hydration and celebrities accounted for 6.92%. Looking at the subregions, Guangdong/non-Guangzhou regional/online direct sales revenue in '23 was 9.1/21.43/413 million yuan, respectively, +9.45%/+51.21%/+79.87% compared with the same period last year. The 24Q1 company continues to focus on the Guangdong market while actively exploring the national market. Sales of new products such as 500ml gold bottles and Dongpeng Water Replenishment continue to increase, driving the company's sales revenue and net profit to grow rapidly. In the future, the company will further improve the national layout of the sales network, strengthen channel construction, guarantee market supply, gradually promote the company's new products to the national region, and actively develop healthy drinks to meet the diverse consumption needs of consumers. By sales model, the company's distribution/direct-operation/online/other revenue was +36.02%/+73.47%/+100.26%/-5.95%. Online channels have doubled their growth. In terms of number of dealers: At the end of 24Q1, the company had 2,912 dealers, a decrease of 69 from the end of 23. Among them, the number of Guangdong/ non-Guangzhou/ online direct sales channels as of 2024Q1 was 271/2139/502, an increase of -17/-58/+6 respectively at the end of '23.
Sugar prices are under phased pressure, the scale effect during the new product cultivation period is weak, and investment in freezing costs is increased before peak season, and short-term profitability is affected. The 24Q1 company's gross profit margin was 42.77%, -0.76pcts year on year; net profit margin was 19.07%, -0.90pcts year over year, or gross margin declined slightly due to high sugar prices and pressure on the raw materials side.
On the cost side, 24Q1 company's sales/management expenses ratio was 17.11%/2.95%, compared to +1.43/-0.30pcts. In order to promote the implementation of the nationalization strategy, the company further expanded the sales scale, increased sales staff, and increased freezer sales expenses, which led to an increase in sales expenses.
Investment advice: The company's product side continuously optimizes the product structure to consolidate the second curve, meet the differentiated needs of different groups of people, continue to explore the national market through channels, increase the overall market rate and coverage of products, and enhance repeat purchases through online and offline multi-dimensional promotion. The company's net profit for 24-26 is estimated to be 27.75/35.92/4.393 billion yuan, respectively, +36.1%/29.4%/22.3% year-on-year. The P/E corresponding to the current stock price is 29/22/18X, respectively, maintaining the “recommended” rating.
Risk warning: New product promotion results fall short of expectations, increased industry competition, and food safety issues.