Key points of investment
Performance situation:
24Q1 revenue of $853 million (+11.3% YoY); net profit attributable to mother of $176 million (+37.2% YoY); net profit after deduction of $147 million (YoY +23.5%).
Consumption has recovered since 23 years, and the company continues to focus on channels, “focus on big customers, build big terminals, and carry out big promotions” to continuously increase its market share. Channel impetus is sufficient, and the main business of remodelling is growing rapidly. Split it up and see:
1) Product division: The company's products are divided into hot pot seasoning, Chinese cuisine seasoning, sausage and bacon seasoning and other products. The gross profit margin of Chinese cuisine seasoning was 38.7% (36.2% in '22), and the gross profit margin of sausage and bacon seasoning was 53.6% (36.3% in '22), while the gross margin of hot pot seasoning was only 33.8%. 24Q1 Chinese cuisine condiments/sausage and bacon seasoning achieved a year-on-year increase of 17.7%/21.8%, and the two combined accounted for +3.5 pcts year over year; 24Q1 hot pot seasoning revenue increased 1.2% year over year, accounting for -3.5 pcts year on year.
2) Channel division: 24Q1 offline/online channels (accounting for 84%/16%) achieved revenue of 719/132 million yuan, up 2.9%/101.2% year-on-year respectively
3) Subregion: 24Q1 East/South/West/North/Central region (accounting for 18.4%/10.2%/36.6%/9.4%/25.5%) achieved revenue of 1.56/0.87/3.11/0.80/ 217 million yuan, up 6.9%/11.1%/23.3%/8.2%/1.6%, respectively.
Profitability: Gross margin increased by 3.4 pcts, net profit margin to mother increased by 3.9 pcts1) Gross profit margin: Product structure improved, gross margin increased. The company's share of high-margin products increased, and the product structure continued to improve, driving the upward trend in gross margin. 24Q1 gross profit margin was 44.1%, +3.4 pcts year over year.
2) Expense rate: Cost structure optimization, continuous improvement in profitability. 24Q1 sales expense ratio 17.0% (YoY +2.2pct), management expense ratio 5.1% (YoY -0.8pct).
Profit forecasting and valuation
According to the company's latest company employee stock ownership plan (draft), the assessment period is 24-25, and the assessment method is to unlock when revenue is achieved every year: based on 2023, 24/25 revenue of 3.46/3.98 billion, corresponding growth of no less than 10%/26.5%, respectively. The 24-year cost pressure has been resolved, the combined cost investment is more refined, and the company's profit flexibility is expected to be released. It is estimated that in 2024-2026, the company's revenue growth rate will be 17%/15%/14%, respectively; the net profit growth rate to mother will be 25%/21%/15%, respectively; and PE will be 26/22/19 times. Maintain an “Overweight” rating.
Risk warning
The recovery in demand fell short of expectations, the decline in channels fell short of expectations, and the promotion of new products fell short of expectations.