Incident: On April 23, the company issued an announcement. In 24Q1, revenue was 1.49 billion yuan, +8.6% year over year; net profit to mother was 240 million yuan, +59.7% year over year.
Revenue from the main business improved month-on-month, and the product structure was gradually optimized. Excluding the impact of the decline in real estate revenue, the revenue of the main condiment business in 24Q1 was +10% year-on-year, up from both 23Q4 and 23Q1. It is expected to benefit mainly from:
1) The preparation period for the Spring Festival was delayed until January; 2) Product changes and marketing changes gradually progressed; 3) Early channel inventory levels were low; 4) Household demand base gradually declined. By category, 24Q1 soy sauce/chicken powder, cooking oil/other revenue was +13.4%/+16.8%/-5.5%/-0.3%. The new product drove soy sauce to achieve a higher than overall growth rate, and chicken extract chicken powder continued the rapid growth trend. By channel, 24Q1 distribution/direct sales revenue was +9.6%/26.8% YoY, including 2,181 dealers, +6.1% YoY, mainly contributed by the Midwest and Northern regions. In the subregion, 24Q1 East/South/Midwest/North revenue was +24.5%/2.6%/9.9%/7.6% year-on-year, all of which achieved month-on-month improvements.
Raw materials have declined and the cost structure has been optimized, and profitability has increased significantly. Net profit margin for 24Q1 was 16.1%, +5.1pcts year over year. Looking at the breakdown: 24Q1 gross margin was 37%, +5.6 pcts year over year, mainly due to: 1) the cost price of soybeans and packaging materials decreased, and the company optimized procurement management; 2) product structure optimization, and the company gradually streamlined product SKU, high-end soy sauce, and increased revenue share of chicken powder with high gross margin. The 24Q1 sales expense ratio was 7.7%, -0.9 pcts year over year, thanks to the company's internal management efficiency. The 24Q1 management fee rate was 6.4%, a slight decrease over the previous year.
24Q2 internal changes continue to be implemented, and performance dividends are expected to continue to be released. In the short term, we believe that the company's product refinement and internal efficiency improvement have achieved certain results, laying a good foundation for subsequent transformation work. 24Q2 will pay more attention to channel side changes. Combined with the low base over the same period, the revenue side is expected to continue to grow rapidly, while product structure optimization and raw material price reduction are expected to hedge the pressure on sales expenses, and the profit side is also expected to remain flexible. In the long run, Delicious Fresh's revenue target for 2026 is 10 billion yuan, and the operating profit target is 1.5 billion yuan. By building the three capabilities of “fine marketing, continuous innovation, and lean operation”, the internal and epitaxial two-wheel drive performance has increased. It strives to become the best condiment company in China and strive to enter the leading condiment ranks in the world.
Investment advice: Adjust the profit forecast according to the announcement, taking into account only endogenous growth. Net profit from 2024 to 2026 is expected to be 8.1/9.7/1.15 billion yuan, PE is 29/24/20X. The company's transformation dividend has already been partially released in 24Q1. We continue to be optimistic about the driving effect of subsequent changes on performance improvement, and maintain the “recommended” rating.
Risk warning: risk of increased industry competition, risk of declining industry demand, food safety risk.