occurrences

On April 25, '24, the company released its '23 annual report and '24 quarterly report. In '23, we achieved revenue of 800 million yuan/ +0.1%, net profit of 140 million yuan/ -5.4%, net profit of non-return to mother of 130 million yuan/ +2.1%; in a single Q4, revenue of 180 million yuan/ -5.7%, net profit of 28.2 million yuan/ -13.9%, net profit of not attributable to mother was 26.85 million yuan/ -7.1%. 1Q24 achieved revenue of 170 million yuan/ -17.9%; net profit due to mother of 18.91 million yuan/ -46.9%; net profit after deduction of 18.64 million yuan/ -46.4%.

reviews

Demand for terminals is weak, and Q1 revenue pressure is still strong. By revenue category, meat and poultry/fishery products in '23 were $53/210 million, +0.6%/-2.7% YoY, and 1Q24 were $100/50 million, respectively, or -21.4%/-20.2% YoY. Looking at revenue by channel, franchise stores reached 430 million yuan/ +0.7%, dealership 100 million yuan/ -23.2%, wholesale 210 million yuan/ -1.5%, direct sales and other channels 14.1 million yuan/ +25.6%, e-commerce customers 2.28 million yuan/ -71.7%, new supermarket channels achieved revenue of 32.53 million yuan, and a net increase of 132/51/98 in 23.

1Q24 franchise/dealer/supermarket channel/wholesale channel/direct sales and other/e-commerce channel revenue was -16.1%/-20.4%/+25.0%/-24.9%/-19.0%/-27.1%, respectively, and the net change of franchise/dealer/supermarket customers/wholesale customers was 7/+15/+4/+12.

Gross margin improved in '23, and new capacity investment affected profitability. The gross margin for 23 years was 26.4% /+2.3 pct, and the sales expense ratio was 5.0% /+1.2pct. The increase was mainly due to the expansion of supermarket channels, and the management expense ratio was 5.4% /+1.5pct. The increase was mainly due to increased personnel and cost sharing of new plants, and the net interest rate to mother was 16.9% /-2.2pct. The 1Q24 company's gross profit margin was 25.0% /-2.1pct, sales/management expenses ratio 5.8%/7.5%, +1.5/+2.9pct. The decline in performance was mainly due to a decrease in sales revenue and an increase in start-up costs due to the construction of new plants, with a net profit margin of 11.4%/-6.2 pct.

Investment advice

Weak short-term demand has put pressure on revenue from various channels. In anticipation of subsequent improvements and production capacity investment, 24E-26E is expected to return a net profit of 1.1/1.3/160 million yuan, corresponding to PE of 34/29/24X, maintaining an “increase” rating.

Risk warning

There is a risk that demand for terminals will be under pressure, store opening will fall short of expectations, and raw material prices will fluctuate.