Incident: Happy Home released its 2024 quarterly report. The company achieved revenue of 551 million yuan in 24Q1, an increase of 6.61% over the previous year, and realized net profit of 82 million yuan, -3.74% year-on-year, and realized deducted non-net profit of 80 million yuan, -5.14% year over year.
The beverage business continued to grow at a high base, and the growth rate of the canned food business was under pressure in the short term 1) The company's beverage products achieved revenue of 311 million yuan in Q1 of 2024, an increase of 23.47% over the previous year, accounting for 56.49% of revenue. Among them, coconut juice products completed revenue of 267 million yuan, an increase of 25.96% over the previous year;
2) The company's canned food business achieved revenue of 220 million yuan in Q1 of 2024, a year-on-year decline of 15.86%, accounting for 39.84% of revenue. The company's 24Q1 canned fruit products achieved revenue of 208 million yuan, down 16.8% year on year. Among them, canned yellow peaches completed revenue of 89 million yuan, down 31.91% year on year, and canned oranges completed revenue of 62 million yuan, up 5.29% year on year. Since the company experienced a sharp increase in revenue from canned yellow peaches during the same period last year due to the high base, the 24Q1 canned business revenue growth rate declined year-on-year, but compared to Q1 in 2021, there was still a 57.17% increase. We believe that this business is developing well, and the impact of the subsequent high base is expected to gradually weaken.
Improvements in raw material costs combined with price increases have both opened up profit margins, and profit flexibility continues to be unleashed.
The company's 24Q1 gross margin reached 38.7%, an increase of 1.83 pct over the same period. We believe it was mainly due to the increase in the share of the beverage business with higher gross margin, and the sales expenses ratio increased by 3.87 pct to 12.95% over the same period. It was mainly due to the company's increased personnel development and maintenance of the terminal market through traditional channels, but the absolute value declined slightly compared to Q4. The remaining management/R&D/finance expense ratios were +0.37/+0.11/+0.33pct to 5.31%/0.18%/-0.1%, respectively. The overall cost level increased year-on-year, causing the company's net interest rate to drop 1.6 pct to 14.9% compared to the same period.
Channel expansion is being actively promoted, and raw material sales and new product layouts are expected to open up multiple growth curves. At the same time, the company is actively expanding diversified channels. Currently, canned fruit products have entered some specialty snack channels, and beverage products are also entering one after another. The channel is currently showing an increasing trend month by month; the development of B-side business and e-commerce business is also progressing in an orderly manner.
Thanks to the fact that the company has now initially formed a multi-channel raw material supply system, initial contacts have also been made in raw material sales and other businesses, and the summer ready-to-drink market was laid out ahead of schedule in conjunction with the new product Coconut Shark Coconut Water series. In the future, the company's growth curve may gradually diversify, and there is room for imagination in terms of performance.
Profit forecasting and investment advice
We estimate that the company's net profit for 24-26 will be 362/4.32/505 million yuan, respectively, and the corresponding PE is 19/16/13 times, respectively. Considering the speed of development of the company's beverage and canned food business, the company was reasonably given 23 times PE in 24 years, with a target price of 18.64 yuan/share, maintaining a “buy” rating.
Risk warning
Risk of rising raw material costs, risk of poor promotion of new products, food safety issues, etc.