Incidents:
The company released its 2023 and 2024 first quarter reports on April 23, 2024. In '23, the company achieved revenue of 1,411 billion yuan, -18.51% year-on-year; net profit attributed/withheld from mother -0.11/-0.07 billion, or -108.72%/-105.09% year-on-year. Among them, 23Q4 revenue was 495 million yuan, +31.18% year-on-year; net profit attributed/withheld from mother was 0.18/024 million yuan, turning a year-on-year loss into a profit. 24Q1 revenue was 384 million, +142.37% year-on-year; net profit attributed/withheld from mother was 0.42/40 million, turning a year-on-year loss into a profit.
Comment:
Overseas business 23H2 began to gradually recover, and gross margin showed a month-on-month upward trend. By product, the revenue of animal skin chewing/vegetable chewing/meat snacks/staple food and wet food in 23 years was 4.24/4.23/3.18/210 million, -22.11%/-34.84%/-5.72%/+31.33% compared with the same period last year. By region, foreign/domestic revenue in '23 was 1,062/350 million, or -27.10%/+26.95%. However, 23H2's foreign revenue fell by only 3.50%, and the growth rate improved significantly from month to month. The main reason was that 23H2 began an overseas inventory replenishment cycle, and demand gradually picked up. In terms of gross margin, the gross margin for the full year of 23 was 19.33%, down 2.97 pcts from the previous year. On the one hand, the share of high-margin vegetable chewing gum declined, and on the other hand, the gross margin of all products except staple food and wet food declined. This is due to poor capacity utilization due to weak demand for overseas orders over the same period last year. However, 23Q1-Q4 gross margin increased from 14.04% to 24.00%, and continued to improve month-on-month, also because the gradual increase in revenue from quarter to quarter increased capacity utilization, and 23H2 customer inventory restructuring was completed, and orders for vegetable chewing gum resumed.
24Q1 revenue and profit grew strongly, and overseas orders are expected to be abundant throughout the year. In 24Q1, with strong recovery in overseas orders and a low base for the same period last year, both revenue and profit grew rapidly. The Cambodian factory experienced a long period of decline in production capacity, and the profit situation improved markedly, and the New Zealand factory's staple food production capacity has also been put into use. Looking ahead to the whole year, the company has plenty of orders in hand, and the New Zealand factory will be able to support customers' OEM needs for staple food products in the future.
Our own brands have performed well in the dog snack segment and are striving to achieve breakthroughs in staple food products.
The company's own brand Jueyan continues to cultivate at the dog snack circuit and has created many tens of millions of popular products. The products have expanded from dried duck meat to canned food. Although there is little space for segmentation tracks, the company maintains a high market share. The 24-year Jue Feast plans to expand dry food and wet food products to open up the growth ceiling. The Haoshijia brand will adjust the product structure to achieve consumer focus through cost performance advantages.
Investment advice: The company has been deeply involved in the pet food circuit for a long time. Currently, overseas orders are recovering strongly. At the same time, domestic brand building is gradually showing results. EPS is expected to be 0.48/0.70/0.88 yuan in 2024-2026, corresponding PE is 30x/21x/17x, which is covered for the first time, giving a “gain” rating.
Risk warning: Overseas demand is insufficient, private brand building falls short of expectations, RMB exchange rate fluctuates