According to the 2024 first quarter report, the 2024Q1 performance exceeded expectations, and the company disclosed the 2024 quarterly report. 2024Q1's revenue/net profit to mother was 1.49 billion yuan/240 million yuan (+8.6%/59.7% YoY), and Delicious Fresh's net profit was 1.46 billion yuan/240 million yuan (+10.2%/59.8%), respectively. Revenue was in line with expectations, and profit exceeded market expectations. Considering cost and supply chain optimization, we slightly raised our profit forecast to forecast 2024-2026 net profit of 8.0 (+0.6) /9.7 (+0.1) billion yuan (+0.1) billion yuan (YoY -52.8%/+21.5%/+26.7%), EPS of 1.02 (+0.06) /1.24 (+0.01) /1.57 (+0.01) yuan. The current stock price corresponds to PE28.6/23.5/18.6 times, maintaining a “buy” rating.
Internal management adjustments have shown results, and the eastern region is growing rapidly
Looking at the split business: 2024Q1 soy sauce, chicken extract, cooking oil, and other revenue changed 13.4%/16.8%/-5.5%/-0.3%, respectively. Revenue growth differentiation in various categories is mainly due to product strategy adjustments. The company divides the main sales, auxiliary, and main promotion product echelons, using chicken extract, chicken powder and soy sauce as the main sales categories, while cooking oil is gradually being used as auxiliary growth categories. Channel side companies increased the distribution of high-quality dealers. 2024Q1 increased net dealers by 97, and 2024Q1 sales reversed the downward trend in each region. Revenue in the East/South/Midwest/North regions was +24.5%/2.6%/9.9%/7.6%, respectively. The rapid revenue growth rate in the main sales area in the east was mainly due to the significant effect of dealer support.
Cost reduction combined with structural upgrades, profit performance exceeded expectations
2024Q1's gross profit margin was 37.0% (+5.6pct year on year), mainly due to lower costs of raw materials such as soybeans and product structure upgrades. At the same time, the company optimized the cost procurement and operation model, changed the high-frequency rolling raw material order model to annual/quarterly procurement, and promoted the digital transformation of the supply chain. On the cost side, the 2024Q1 company's expense ratio is -1.3pct, with sales/management/R&D/finance expenses ratios of 7.7%/6.4%/2.9%/-0.1%, respectively.
Long-term outlook: Equity incentives stimulate internal vitality, and contextual+outreach work together (1) connotation growth: a multi-pronged approach of measures such as national channel layout (such as catering and e-commerce channels), sorting out product echelons, and increasing R&D investment; (2) epitaxial expansion: category supplement+channel expansion. Currently, the company has proposed specific solutions and measures for channel transformation, organizational restructuring, supply chain optimization, etc., and as reforms continue to advance, we expect the company's long-term growth vitality to continue to be unleashed.
Risk warning: risk of raw material price fluctuations, food safety incidents, and reform progress falling short of expectations.