Incident: The company released its 2024 quarterly report. In 24Q1, it achieved operating income of 853 million yuan, an increase of 11.34% over the previous year, and realized net profit of 176 million yuan, an increase of 37.20% over the previous year, and realized net profit without return to mother of 147 million yuan, an increase of 23.47% over the previous year.
The main business grew steadily, and the product structure continued to be optimized. 24Q1 achieved revenue of 853 million yuan, an increase of 11.34% over the previous year. We expect steady growth mainly due to: 1) e-commerce channels are showing significant results; 2) the revenue scale of Chinese food seasoning, sausage and bacon seasoning has increased steadily.
By product, Q1 achieved revenue of 2.93/4.95/0.33 billion yuan in Q1, +1.18%/+17.75%/+21.79% over the same period last year, with an overall increase in revenue for core categories. Looking at the subregions, the East/South/West/North/Central region achieved revenue of 1.56/0.87/3.11/0.80/217 million yuan in Q1, compared with +6.88%/+11.15%/+23.35%/+8.20%/+1.56. The national market maintained steady growth, and the channel expansion effect in the western region was obvious. By channel, offline/online revenue of 719/132 million yuan was achieved in Q24, +2.94%/+101.23% over the same period last year, and online revenue increased significantly. Furthermore, as of Q1 '24, the number of the company's dealers had grown to 3,183, with a net increase of 24 in the western region, and the regional revenue structure was gradually optimized.
Profits are growing rapidly, and profitability continues to improve. The 24Q1 company achieved net profit of 176 million yuan, an increase of 37.20% over the previous year, and realized net profit withheld from non-mother of 147 million yuan, an increase of 23.47% over the previous year. The gross margin of the 24Q1 company was 44.05%, an increase of 3.43 pcts over the previous year. We expect a significant increase in gross margin mainly due to product structure optimization and a decrease in raw material costs. In terms of cost ratios, the company's sales/management/R&D expenses were 17.02%/6.13%/1.05%, respectively, compared with +2.18/-0.89/-0.07pct. The increase in sales expenses was mainly due to the company increasing investment in e-commerce channels. The 24Q1 net profit margin was 20.90%, up 4.22pcts year-on-year.
Over the long term, with the gradual recovery of C-side demand, we expect the company's C-side revenue to maintain steady growth. In terms of new products, the company will develop and complete the non-spicy soup product matrix and extend the hot pot series after approval; in terms of channels, increase the coverage of excellent business support, strengthen dealer alliance organizations, and continue to empower dealers. Looking at the small B side, Food Extract is expected to achieve 50% growth with strong customer stickiness and the company's continuous empowerment. At the same time, along with a steady decline in costs and improvements in expenses, the company's profitability is expected to increase steadily. In the long run, we believe that as the market gradually clears up, industry concentration is expected to be concentrated at the top, and we are optimistic about the company's marginal improvement and long-term development.
Profit forecast: The company is expected to achieve revenue of 36.75/42.80/4.985 billion yuan in 24-26, +17%/16% year-on-year, and achieve net profit of 5.52/6.48/ 784 million yuan, compared to the same period, +21%/21%, EPS of 0.52/0.61/0.74 yuan/share, respectively, maintaining the “Highly Recommended” rating.
Risk warning: food safety risk, raw material price increase risk, seasonal product sales risk