Quick freezing is under pressure, and the non-profit margin after deducting is stable
Guangzhou Restaurant released a quarterly report. 1Q24 achieved revenue of 1,012 billion yuan (yoy +10.04%, qoq -1.21%), net profit to mother of 707.816 million yuan (yoy +2.22%, qoq +20.27%), net interest rate of 6.99%; net non-net profit of 666.112 million yuan (yoy +1.15%), net profit of 6.58%, and revenue and profit growth remained steady. Based on the medium- to long-term line, a new frozen production line has been built to accelerate the release of production capacity. Taotaoju in East China is climbing the slope at an accelerated pace. The food+catering business is expected to continue to expand, and there is considerable room for long-term growth for long-established brands. We expect the company's EPS for 2024-2026 to be 1.09/1.27/1.45 yuan, respectively, to give food/catering PE24/12X for 24 years (comparable company Wind consistently predicts 24/12X), adjust the target price to 22.61 yuan (previous value: 25.2 yuan), and maintain the “gain” rating.
Food and catering revenue grew steadily, and effective cost control profitability was stable 1Q24 food business revenue of 603 million (yoy +8.99%), of which revenue from other products yoy +27.56%, and revenue from frozen products was yoy -4.10%. Direct food sales and distribution are developing steadily, with revenue yoy +8.95% and +9.01% respectively; the expansion within mainland China and outside Guangdong Province was smooth, with revenue of 137 million yuan (yoy +13.69%), and the growth rate was higher than within the province (yoy +6.62%). The restaurant business benefited from store expansion and achieved revenue of 384 million (yoy +13.33%). 1Q24's gross profit margin was 29.81%, -2.58pct year on year, mainly due to the increase in the share of other products and the drag on the catering business. The non-net interest rate was 6.58% and -0.58pct year-on-year, which was basically the same, mainly due to the period expense ratio -2.25pct year on year. Among them, the sales and management expenses ratio improved slightly, and the increase in interest income/reduction in expenses led to a decrease of 1.27pct in the financial expense ratio.
The distribution network continues to be adjusted, and there is still room to free up production capacity
The 1Q24 quick-freezing business was under pressure, and the company continued to adjust and optimize distributors. At the beginning of the period, 574 dealers in Guangdong Province were adjusted to 559, domestic and overseas dealers were adjusted from 473 to 445, and 1 new overseas dealer was added to 26. There is still plenty of room for expansion of the distribution network outside the province. The company actively explores new markets and regions around the “Strong Catering Brand, Food Scale Creation” strategy. There is still plenty of room to release future quick-frozen and mooncake production capacity at the Guangzhou headquarters, Maoming, Xiangtan, and Meizhou.
The target price is 22.61 yuan, maintaining the “gain” rating
Referring to the 1Q24 business situation, we expect that category demand growth momentum will be weak in 24-26, and that there may be some pressure. The gross margin will be dragged down by structural changes. The 24-26 EPS is 1.09/1.27/1.45 yuan (previous value: 1.21/1.48/1.81 yuan). Comparable food/catering company Wind consistently predicts PE24/12X in 24, and the segmented valuation method gives food a target market value of 10.8 billion yuan (450 million net profit/PE24X, mooncake demand is mediocre and remains affordable) /The target market value of catering is 2 billion yuan (net profit of 170 million yuan/PE12X, the development of the middle and high-end Chinese food categories has entered a bottleneck stage, maintaining affordability), and the target price is 22.61 yuan (previous value 25.2 yuan).
Risk warning: Consumption power is damaged; expansion outside of the province falls short of expectations; catering recovery is slow.