Incident: 2024Q1 achieved revenue of 1,485 million yuan, an increase of 8.64% year on year; achieved net profit of 239 million yuan, an increase of 59.70% year on year; realized net profit of 237 million yuan after deduction, an increase of 63.91% year on year.
Delicious Fresh achieved revenue of 1,461 billion yuan, an increase of 10.20% over the previous year; realized net profit of 244 million yuan, an increase of 59.75% over the previous year, and the net profit margin increased by 5.18 pcts to 16.71%.
Soy sauce and chicken extract and chicken powder are growing rapidly, and the eastern region has shown the results of the reforms. 2024Q1 achieved condiment revenue of 1,443 billion yuan, an increase of 10.04% over the previous year. Among them, soy sauce, chicken extract, cooking oil, and other condiments achieved revenue of 9.47, 1.81, 1.01, and 213 million yuan respectively, with year-on-year increases of 13.44%, 16.83%, -5.54%, and -0.31%, respectively. Core products, soy sauce and chicken powder, grew rapidly, cooking oil with low gross margin declined, and revenue from other condiments declined slightly. By region, the eastern, southern, midwestern, and northern regions of 2024Q1 achieved revenue of 3.72, 5.22, 3.24, and 225 million yuan respectively, with year-on-year increases of 24.48%, 2.64%, 9.90%, and 7.61%, respectively.
The east grew rapidly, reflecting the results of the company's reforms. The number of company dealers increased net by 97 to 2,181 in the first quarter, with net increases of -2, 5, 65, and 29 in the eastern, southern, midwestern, and northern regions respectively.
Gross margin increased significantly, boosting the release of profit flexibility. 2024Q1's gross margin increased by 5.57 pcts year-on-year to 36.98%, mainly benefiting from lower purchase unit prices, optimized product structure, and increased revenue. The company's sales, management, R&D, and financial expense ratios for the first quarter were -0.85, -0.05, -0.34, and -0.04 pcts year-on-year to 7.73%, 6.36%, 2.87%, and -0.11%, respectively. Benefiting from a sharp increase in gross margin, the company's net profit margin increased by 5.15 pcts to 16.10% in the first quarter.
Profit forecast: The company's reform ideas are clear, motivated, and steady. We look forward to the implementation of more reforms in the future to accelerate revenue and profit growth. According to the company's quarterly report, considering the accelerated implementation of reform dividends, we raised our profit forecast. The company's revenue for 2024-2026 is 58.60, 68.76, and 7.890 billion yuan (original value was 58.00, 68.06, 7.812 billion yuan), net profit to mother is 7.90 billion yuan, 9.72 billion yuan, 1,172 billion yuan (original value was 7.64, 9.39, 1.33 billion yuan), and EPS was 1.01, 1.24, and 1.49 yuan respectively. We expect the subsidiary's revenue for 2024-2026 to be 55.95, 6.594, and 7.594 billion yuan, respectively, with growth rates of 13%, 18%, and 15%, respectively, and net profit to mother of 7.59, 9.25 billion yuan, and 1100 billion yuan respectively. The growth rates are 36%, 22%, and 19%, excluding the value of the real estate business of about 2 billion yuan. The current share price of the condiment business PE is 26 times, 21 times, and 18 times, maintaining a “buy” rating.
Risk warning events: food safety risks; increased competition for middle and high-end soy sauce; nationalization falling short of expectations; risk of real estate divestment matters failing or progressing less than expected; risk of untimely update of research information