Core views

The company uses “big packaging” to promote the sale of full-box and bagged products, and continuously promotes the steady development of traditional offline distribution channels, modern channels, and three-dimensional omnichannel online channels. In terms of the product matrix, the company focuses on the three major categories of fish products, poultry products, and soy products. The six major product series “deep-sea fish, quail eggs, dried beans, dried meat, konjac, and vegetarian meat”. The second growth curve is that quail eggs continue to be released rapidly. The company's products have been refined and prepared with a rich range of products and high consumer acceptance. Combined with the company's channel development, the number of dealers has increased, and large packaging has promoted channel upgrading. We believe that the company has entered a rapid development path, and its performance is gradually being realized, and revenue will continue to increase in the next 1-2 years.

occurrences

The company released its report for the first quarter of 2024

In the first quarter of 2024, the company achieved revenue of 540 million yuan, an increase of 23.58% year on year; net profit to mother was 74 million yuan, up 87.7% year on year, and net profit without return to mother was 58 million yuan, an increase of 77.45% year on year.

Brief review

Q1 The revenue growth rate was lower than market expectations. Seizing the year-round growth opportunity, the company continued to cultivate the three high-quality protein health categories of recreational fish products, poultry products, and soy products to create the six best-selling products of “deep-sea fish, quail eggs, dried tofu, dried meat, konjac, and vegetarian meat”. Kaimenhong's revenue growth rate has maintained a relatively rapid growth rate. The revenue growth rate is expected to be lower than market expectations due to factors such as inventory adjustments in March, delays in e-commerce, etc. Looking at the company's second growth curve for quail eggs throughout the year, channel upgrades and supply chain optimization continue to advance, reducing monthly fluctuations, and the certainty of high growth throughout the year is still strong.

Raw material costs have declined, and profitability has been realized

The company's gross profit margin for the first quarter was 30.02%, up 4.04pcts year on year. Prices of raw materials such as anchovies, quail eggs, and soybeans all fell year on year. The gross margin base for dried small fish was low during the same period last year. The decline in anchovy prices led to the restoration of dried small fish. At the same time, the gross margin of quail eggs continued to rise. At the same time, the company continued to optimize the supply chain. Quail eggs at the Beihai production base are under construction and will be put into operation one after another in the first half of 2024 to help restore profitability. The company's 24Q1 sales expenses ratio was 13.12%, an increase of 1.24pcts over the previous year, mainly due to increases in brand, advertising, and e-commerce platform promotion service fees and wages. 24Q1 Company's net interest rate of 13.63%/10.82% from the mother was 13.63%/10.82%, an increase of 4.66/3.28 pcts over the previous year, representing an increase in government subsidies.

Product matrix optimization to create high-quality large single products

The company currently has product lines such as “2 billion grade” large single product Jinzai deep-sea small fish, “1 billion grade” high potential single product quail eggs, “200 million grade” single product dried tofu and dried meat, and “100 million yuan” single product konjac. Among them, the “1 billion grade” potential single product quail egg was launched in the first full year, and annual sales have exceeded 300 million yuan. The company's product matrix is gradually being broadened, and the ability and experience to cultivate large single products are continuously enhanced, and integrated to further establish the company's brand image.

Profit prediction and investment suggestions: The company uses “big packaging” to promote the sale of full-box and bagged products, and continuously promotes the steady development of traditional offline distribution channels, modern channels and three-dimensional omnichannel online channels. In terms of the product matrix, the company focuses on the three high-quality protein health categories of recreational fish products, poultry products, and soy products to create the six best-selling products of “deep-sea fish, quail eggs, dried tofu, dried meat, konjac, and vegetarian meat”. The company's products have been polished and prepared with a rich variety of categories and high consumer acceptance of tastes. Combined with the company's channel development, the number of dealers has increased and the snack franchise channel is rapidly released. We believe that the company has entered a rapid development path, and revenue will continue to increase rapidly in the next 1-2 years. Since the company's profit exceeded expectations, we expect the company's revenue for 2024/2025/2026 to be 2,703/33.50/4.014 billion yuan, up 31%/24%/20% year on year, and net profit of 2.99/3.82/469 million, respectively, up 43%/28%/23% year on year, maintaining the “buy” rating.

Risk warning:

1. The new product matrix design falls short of expectations, and newly launched products may not be loved by consumers; 2. The expansion of new channels is not going well, and the snack franchise channel may reach a peak, then the growth rate will slow down. Fierce competition within the industry will reduce the efficiency of single stores; competition in the snack industry has intensified, and various brands have greatly discounted in order to seize market share, causing the profit level of the industry to decline; 3. The sharp decline in supermarket traffic will cause the supermarket channel's revenue to shrink further; 4. Residents' spending power has declined, residents' desire to buy optional foods has declined, and small brand products in counties, townships, and low-tier cities are once again popular due to low prices; 5. There is a risk of capital occupation by non-operating related parties. Currently, the company does not have a controlling shareholder or other related party's non-operating capital occupation. If related governance issues occur, it may have a big impact on the company's operations.