Incident: The company disclosed its annual report for the year 23 and the quarterly report for '24: the company achieved revenue of 2,635 billion yuan, +7% year over year; net profit to mother of 166 million yuan, +20% year over year; realized net profit without return to mother of 144 million yuan, +26% year over year. In addition, in Q1, the company achieved revenue of 207 million yuan, -4.13% year-on-year; net profit loss to mother was 70 million yuan.
Core categories such as rice dumplings grew steadily, and the chain store channel achieved a rapid increase in revenue. By product, revenue of rice dumplings series/ mooncake series/ meal series/ egg products, pastries and other channels was +11.06%/-4.32%/+4.78%/-5.54%, respectively; among them, the sales volume and tonnage price of the core category rice dumplings were +14.52%/-3.02% year-on-year, respectively, while mooncake sales volume and ton price were +2.80%/-6.93%; by channel, the revenue of chain stores, e-commerce, supermarkets, dealers, and other channels in '23 was +26.68%/+26.68% 13%/-15.18% /+10.89/-6.85%, of which the company's chain stores opened 112 direct stores and 25 cooperative stores, respectively -26/0; by region, the company's revenue in East China/North China/ South China/ Southwest/ Northwest/ Northwest/ E-commerce was +10.5%/+4.57%/+1.07%/-1.52%/+9.24%/+13.27%/+5.02%, among which the steady growth in the southwest and northwest China was mainly due to the company improving its distribution system and continuing to develop terminals. Also, as of the end of '23, the changes in dealers in East China, North China, Central China, South China, Southwest China, and Northwest China were +5/-7/+16/-9/+2/-1/+1, respectively.
Q1 '24: The company's revenue for rice dumplings/ meals/ egg products, pastries and others was -2.32%/+1.43%/-7.07%, respectively; by channel, Q1 Q1 chain store/e-commerce supermarket/dealer/other channel revenue was -5.39%/-24.09%/+15.43%/+3.17%/+15.01%; by region, Q1 Q1 E-commerce revenue was -0.1%/-2.45%/ -7.11%/+74.72%/+103.44%/-37%/-28.83%. Corresponsibly, the number of the company's dealers in East China/ North China/ Central China/ Southwest/ Northwest/ Northeast China during the same period was -59/-5/-6/-14/-11/-7/-2, respectively.
Profitability declined slightly year-on-year due to pressure on tonnage prices for core categories and weak supermarket channels. In terms of profit, gross sales margin in '23 was 36.39%, -1.10 cts year on year. Mainly the gross margin of supermarket channels declined significantly, reaching -12.27 pcts year on year; gross sales margin in Q1 was 34.28%, -0.39 pcts year on year. On the cost side, the total of the four rates in '23 was -0.8 pct year over year, and the sales/management/R&D/finance cost rates were -1.01/+0.67/+0.13/ -0.6 pcts year over year; while Q1 expenses rose slightly in Q1, the total four rates were +2.11pcts year over year, and the 24-year Q1 sales/management/ R&D/ finance rates were +1.32/+0.34/+0.14pcts, respectively. Finally, the net sales margin for '23 was 6.22%, +0.64pct year over year.
Profit forecast and investment advice: Considering that the company's performance in 23 fell short of expectations, we lowered our profit forecast. We expect net profit to be RMB 21/252 million for 24-25 (RMB 230/267 million yuan for 24-25), net profit to mother in '26 of 300 million yuan, and profit for 24-26 compared to 28%/20%/19%, respectively. Considering that the company is the number one brand in the rice dumpling category in China, implementing the “glutinous +” strategy to develop diversified products, we are optimistic that the company will continue to develop, maintain the company's PE 22 times in 24 years, and the corresponding target price is 32.46 yuan, maintaining a “buy” rating.
Risk warning: food quality and safety, expansion of large products falling short of expectations, price fluctuations of major raw materials, etc.