Event: The company's 2023 revenue +15.4%, net profit to mother +120.1%; 2024Q1 revenue +24.4%, net profit to mother +56.2%. In 2023, it achieved operating income of 3.75 billion yuan (+15.4% YoY) and net profit of 230 million yuan (YoY +120.1%); 2024Q1 achieved operating income of 880 million yuan (+24.4% YoY) and net profit to mother of 56.22 million yuan (+259.0% YoY).
The company's gross profit margin and net profit margin are constantly increasing. On a quarterly basis, revenue for 23Q1/23Q2/23Q3/23Q4 was -11.0%/+26.7%/+17.0%/+28.4%, and net profit to mother was -33.1%/+79.1%/+74.1%/+748.6% YoY. The gross margin for 2023 was 26.3% (+6.5 pcts year over year). The cost rate for the period was 16.2%, of which the sales expense ratio was 10.3% (+1pcts year over year); the management expense ratio was 5.1% (+0.2pcts year over year); the R&D expense ratio was 1.3% (-0.1 pcts year over year); the financial expense ratio was 0.8% (+0.3 pcts year over year); and the net sales margin was 7.8% (+4.1pcts year over year). 2024Q1 gross margin was 27.8% (YoY +3.5pcts), with a period expense ratio of 17.8%, of which sales expense ratio was 10.4% (YoY +0.7pcts); management expense ratio 6.8% (YoY -0.1pcts); R&D expense ratio 1.7% (YoY -0.1pcts); financial expense ratio 0.7% (YoY -1.0pcts); and net sales margin was 7.4% (YoY +3.6pcts).
Pet staple food increased significantly in 2023, with domestic income growing at a higher rate than overseas. By product: 1) Pet snack revenue of 2.35 billion yuan (YoY +9.8%), accounting for 63%, gross margin of 25.4% (YoY +6.8pcts); 2) Canned pet revenue of 6.3 billion yuan (YoY +5.8%), accounting for 17%, gross profit margin 32.6% (YoY +6.2pcts); 3) Pet staple food revenue of 580 million yuan (YoY +60.2%), accounting for 15%, gross margin of 29.1% (YoY +8.6pcts). As the company's production capacity climbed, the scale effect gradually became apparent. By region: 1) Domestic revenue of 1.09 billion yuan (+20.4% year over year), and the results of the reform are expected to be gradually reflected in 2024; 2) Overseas revenue of 2.66 billion yuan (+13.4% year over year). As overseas customers end inventory removal, export business orders have returned to a steady state of growth, while the profit level of overseas factory business has increased year-on-year.
Investment advice: The company is based on the steady development of overseas business and is deeply involved in the domestic market. With the rapid development of brand building and product innovation capabilities, future performance growth can be expected. We expect the company's net profit for 2024-2026 to be 277, 3.28 million yuan, and 388 million yuan, EPS 0.94, 1.11, and 1.32 yuan respectively, and PE corresponding to the closing price on April 25 will be 26, 22, and 18 times, respectively, maintaining the “increase” rating.
Risk warning: Food quality and safety risks, market competition risks, recipe improvement and new product development risks, risks of relatively insufficient marketing development in supermarkets and e-commerce channels