Incident: The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 2.65 billion yuan, -14.9% year on year; realized net profit to mother of 730 million yuan, -29.4% year on year; realized net profit after deduction of 710 million yuan, -28.7% year on year.
Growth is pressured by a high base, controlling information flow delivery or affecting short-term online performance. By brand, 24Q1 main brand/ Jianliduo/Life-Space domestic products/LSG overseas achieved revenue of 15.5/3.7/1.2/250 million yuan, respectively, -17.7%/-2.1%/-29.5%/-5.1% year-on-year. 23Q1 stimulated sales of protein powder, vitamins, probiotics and other categories due to the outbreak of immune demand, and the main brand and Life-Space base were high. By channel, 24Q1 online/offline channels achieved revenue of 91/1.72 billion yuan respectively, or -26.5%/-7.6% year over year. Short-term growth was under pressure under pressure under high base, and the company adjusted cost investment strategies to control the flow of information related to sales transformation, increase investment in brand promotion, cultivate long-term brand power, or affect short-term online sales performance.
Gross profit margins are basically stable, and rates are rising due to partial preemption of sales expenses and revenue pressure. The company's 24Q1 gross margin was -0.4 pct year over year to 69.9%, which remained stable. The 24Q1 sales/management/R&D/finance expense ratio remained flat at 31.2%/4.7%/1.2%/-0.5% year over year. The sales expense ratio increased significantly under the pressure of revenue growth due to partial pre-investment of sales expenses. Taken together, due to rising rates, the company's net interest rate was -6.6pct to 27.2% year over year.
The revenue side is expected to recover month-on-month, and the strategic results may be gradually realized. Immunity enhancing categories such as protein powder, vitamins, and probiotics account for a relatively high share of the company's revenue. Short-term growth was under pressure from a high base in the same period last year, and the revenue side growth rate is expected to recover month-on-month as the base declines. We believe that the current company strategy focuses on steady development in the medium to long term, and the results of the adjustment are expected to be gradually realized. The organizational structure will complete the restructuring of the division and the second wave of talent introduction in 2023 to save energy for the new cycle of growth; the marketing side will reduce short-term investment and shift to brand side investment to build strong brands in multiple categories; the product side has obtained new approvals for protein powder and Jianli Duo, and is expected to launch new products with stronger efficacy during the year, and use the product iterative upgrade period to differentiate products from each channel, improve the price system, and form an omni-channel differentiated multi-pallet.
Investment advice: Considering that the revenue side base is high, and the company is in a multi-brand cultivation period, the profit forecast is slightly adjusted. It is expected to achieve net profit of 18.14/20.68/2,255 billion yuan in 2024-2026 (the previous forecast was 19.25/21.49/2.384 billion yuan), +3.9%/+14.0%/+9.0% year-on-year. The corresponding PE price is 14/13/12 times, maintaining the “increase” rating.
Risk warning: Consumption recovery falls short of expectations, industry competition intensifies, and the cultivation of large single products falls short of expectations.