Incident: In 2024Q1, the company achieved revenue of 1,485 billion yuan, +8.64% year over year; realized net profit of 239 million yuan, +59.70% year over year; realized net profit of 237 million yuan without return to mother, +63.91% year over year.
The main business performance was in line with expectations, and the product portfolio plan was gradually clarified. Delicious Fresh achieved revenue of 1,461 billion yuan in 2024Q1, +10.20% over the same period. Mainly soy sauce, chicken extract, and chicken powder, had good revenue performance. By business, 2024Q1 soy sauce/chicken powder, cooking oil/other products were +13.44%/+16.83%/-5.54%/-0.31%, respectively. Soy sauce has resumed good growth. We believe that the company's clear product portfolio plan has brought good results with concentrated resources; chicken essence and chicken powder have maintained a high growth rate, mainly due to a recovery in food and beverage demand.
The gross margin improved significantly, and the control of expenses during the period was excellent. 2024Q1 gross margin was 36.98%, +5.57pct YoY. The sharp improvement in gross margin was mainly due to a decrease in the purchase unit price of raw materials and adjustments in the procurement model. On the cost side, 2024Q1 sales/management/R&D/finance rates were -0.85/-0.04/-0.34/ -0.04pct, respectively. The reduction in sales rates was affected by a reduction in related personnel. Transferred to the net profit side, the 2024Q1 net margin was 17.63%, +5.96pct year over year. Looking ahead to 2024, cost improvements will continue to advance, and profits are expected to improve; however, considering that the company will strengthen channel construction and product promotion, sales rates may increase.
The target doubling path is clear, and channel construction is the primary core in 2024. In order to achieve the 3-year plan and 10 billion revenue target, the company will accelerate changes in channel transformation, promotion transformation, product upgrading, organizational restructuring, supply chain optimization, cost optimization, R&D innovation, and efficiency improvement. Among them, channel construction is a top priority in 2024. By increasing product portfolio coverage, increasing terminal sales, ensuring the continuous and stable share of individual stores, and actively developing catering channels, it forms a virtuous cycle. On the dealer side, we actively develop new customers, revitalize existing customers, implement hierarchical management, and introduce a target responsibility assessment mechanism.
Investment advice: We expect the company to achieve revenue of 58.27/68.72/8.245 billion yuan in 2024-2026, +13.39%/17.93%/19.97%, and achieve net profit of 8.12/9.61/1,268 billion yuan, year-on-year, -52.16%/18.36%/31.95%, EPS of 1.03/1.22/1.61 yuan respectively, corresponding PE of 28.35/23.95/18.15x, maintaining the company's “gain” rating.
Risk warning: Channel reform falls short of expectations; food safety risks; risks such as fluctuations in raw material prices.