Event: The company released its 2023 annual report. In 2023, the company achieved operating income of 14.05 billion yuan, a year-on-year increase of 15.3%, achieved net profit of 1.48 billion yuan, an increase of 34.2% over the previous year, and realized net profit without deduction of 1.36 billion yuan, an increase of 36.8% over the previous year.
In a single quarter, 23Q4 achieved operating income of 3.77 billion yuan, a year-on-year decrease of 6.3%, realized net profit of 356 million yuan, a year-on-year decrease of 13.4%, and realized net profit without deduction of 338 million yuan, a year-on-year decrease of 13.9%. Revenue profit was slightly lower than expected. The dividend plan is $1,775 for 10 payments, with a cash dividend of $520 million. Combined with a semi-annual cash dividend of $220 million for '23 and a repurchase amount of $46 million for '23, it accounts for a total of 53.17% of net profit returned to mother in '23.
The company released its 2024 quarterly report. 24Q1 achieved operating income of 3.75 billion yuan, a year-on-year increase of 17.67%, and net profit of 438 million yuan, a year-on-year increase of 21.24%, after deducting net profit of 420 million yuan, an increase of 21.56% year-on-year. In our performance outlook, we predicted that revenue and profit would increase 17% and 13% year over year, respectively. Revenue was in line with expectations, and profit exceeded expectations.
Investment rating and valuation: Maintain the 2024-25 profit forecast, add 2026, and forecast net profit of 2024-26 to be 1.70 billion, 2.07 billion, and 24.1 billion, respectively, up 15%, 21%, and 17% year-on-year respectively. The current stock price corresponds to 2024-26 PE is 14x, 12x, and 10x, respectively, maintaining the purchase rating. Continue to be optimistic about the company's balanced development idea of “balancing BC” and “moving along the three paths”. In the medium to long term, while deepening the BC channel and the moat of the main business, the volume of lock fresh packaging, shrimp paste, and marunozun is expected to help upgrade the old business structure, while Mr. Frozen Plus Chef Yasui + Xinhongye Xinyugu is expected to achieve a rapid increase in the second growth curve of cooking products. The company is expected to become a more comprehensive food enterprise and maintain a buying rating.
The year 23 ended steadily, and the main business revenue recovered high in 24Q1. Looking at subsidiary companies, the revenue performance of the main business, subsidiaries and categories is expected to be under pressure in 23Q4 due to consumer demand. According to the 2023 annual report, by category, in 23, the company 1) revenue from rice and noodle products was 2.55 billion yuan, up 5.4% year on year, volume price was +5% and +0.4%, respectively. Among them, 23Q4 company maintained normal promotion efforts, 2) meat products revenue was 2.63 billion, up 10.2% year on year, volume and price were +9.4% and +0.7% year on year, 3) surimi product revenue was 4.41 billion yuan, up 11.8% year on year. , volume and price were +32.7% and -2.2%, respectively.
According to the 2014 quarterly report, according to the subsidiary company, benefiting from the cooling and peak season, Yasui's main business revenue is expected to resume large double growth in 24Q1, faster than the overall performance; Mr. Frozen's income is basically stable, mainly affected by public opinion on prepared dishes; while Xinhongye's new willow income is being dragged down by crayfish sales prices. By category, 24Q1's revenue from rice and noodle products/meat products/surimi products/dish products was 640 million/790 million/1.27 billion/ 950 million, respectively, +4.4%/+27.7%/+31.5%/+12.3%, respectively. Among them, Yasui's main business achieved a high increase in revenue from meat products and surimi products, mainly driven by Marunozun and Fresh Packaging. Looking ahead to 2024, the company will focus on creating new national strategic products such as fresh packaging upgrades, volcanic stone sausage, and oven series, as well as new regional products. On a medium- to long-term level, with the implementation and implementation of standards for the prepared food industry, the entry threshold for the industry is expected to be raised, and I am optimistic that the company will lead the development of the prepared food industry as a leading enterprise.
Profitability continued to reach new highs in '23 and 24Q1. According to the 2023 annual report, 23Q4's profits are under pressure, mainly because Xinliuwu did not fulfill the promised performance, calculated a 3.09 million goodwill depreciation, and Xinhongye both recorded about 12 million inventory price losses; the 23Q4 net interest rate for the company's main business is expected to decline month-on-month, but the trend is still improving year-on-year. On a full-year basis, the company achieved an overall gross profit margin of 23.2% in 23, an increase of 1.3 pct over the previous year. It mainly benefited from the reduction in raw material costs. The gross margin of the four core categories all increased to varying degrees.
In terms of cost ratios, the company's sales/management/R&D/finance expenses changed year-on-year in '23, respectively, and remained flat. Among them, the decline in sales expenses was mainly due to the dilution of revenue scale and the company's reduction in sales personnel and advertising investment. Among them, employee remuneration of 340 million (+4.2% yoy) and advertising expenses of 196 million (-3.2% yoy) in 23 years. In summary, the company's consolidated net interest rate in 2023 was 10.5%, an increase of 1.5 pct over the previous year, a record high.
According to the '23 quarterly report, low crayfish prices put pressure on Xinhongye's 24Q1 performance. However, the 24Q1 consolidated profit performance exceeded expectations. It is expected that the main business's profitability will continue to increase, supporting overall profit margin performance. Looking at a single quarter, the 24Q1 company's overall gross margin was 26.6%, an increase of 1.8 pct over the previous year, mainly benefiting from the increase in the product structure, cost improvement, and production scale effects during the peak season due to high growth in fresh packaging. In terms of cost ratios, 24Q1 company's sales/management/R&D/finance expense ratios changed by +0.1 pct/+0.3 pct/flat /+0.2 pct, respectively. Overall, the 24Q1 consolidated net interest rate was 11.7%, an increase of 0.3 pct over the previous year, and continued to reach new highs from month to month. Looking ahead to 2024, although crayfish prices continue to be sluggish, the industry has begun to clear up. With the support of Yasui channels and brands, Xinhongye Xinliuwu is expected to gain more share of the crayfish market in the medium to long term. Furthermore, driven by upgrading the product structure, increasing the self-production ratio of cooking products, keeping raw material costs low, and diluting sales expenses, the profit margin of the company's main business is expected to continue to rise steadily, supporting the consolidated profit performance for 24 years.
Catalysts for stock price performance: revenue exceeds expectations, new product performance exceeds expectations, raw material costs fall
Core Hypothetical Risk: Food Safety Issues