The scale of revenue has expanded steadily, profits have grown rapidly, and the “buy” rating has been maintained

The company achieved revenue of 784 million yuan in 2023 (-5.39% year-on-year, all figures below); net profit to mother of 255 million yuan (-8.39%); net profit after deducting non-return to mother of 227 million yuan (-10.45%). 2024Q1 achieved revenue of 221 million yuan (+7.15%); net profit attributable to mother of 77 million yuan (+23.19%); net profit after deducting non-return to mother of 68 million yuan (+22.30%). In terms of profitability, gross margin was 82.72% (-1.69pct) in 2023, and net margin was 32.44% (-1.03pct). On the cost side, the 2023 sales expense ratio was 40.39% (+1.87pct); the management expense ratio was 11.09% (+0.74pct); the R&D expense ratio was 6.33% (+0.57pct); and the financial expense ratio was -2.94% (-1.48pct). We are optimistic about the future development potential of the company's Ganoderma lucidum spore powder and dendrobium officinale products as people raise health awareness. At the same time, considering that the company's marketing reforms are still in progress, the 2024-2025 period was lowered and the 2026 profit forecast was added. The net profit for 2024-2026 is estimated to be 2.85/3.24 billion yuan, 362 million yuan (originally estimated 2024-2025 is 404/487 million yuan), EPS is 1.41.61/1.79 yuan. The current stock price corresponds to PE 18.7/ 16.5/14.7 times, maintaining a “buy” rating.

Revenue from Ganoderma lucidum spore powder and dendrobium officinale products declined slightly. In 2023, the company's Ganoderma lucidum spore powder products achieved revenue of 534 million yuan (-7.92%) and gross margin of 87.81% (-0.87pct); revenue from dendrobium officinale products was 127 million yuan (-2.03%), and gross margin was 78.64% (-0.08pct). By region, revenue within Zhejiang Province was 478 million yuan (-8.49%), revenue outside Zhejiang Province was 80 million yuan (-17.89%), and Internet revenue was 212 million yuan (+7.35%).

Marketing reforms continue to advance, and clinical research empowers brand development

The company's strategic focus has moved forward, established a digital marketing center, and promoted management to sink into the marketing center and regional market positions, reorganized the management department of the marketing center, and reorganized the management team members of the marketing center and regional markets to promote the reform and innovation of marketing mechanisms. At the same time, the company continues to promote research on core products in other fields of indication, participating in “research on the clinical efficacy of decarbonized Ganoderma lucidum spore powder against tumors and improving immunity”, “clinical research on the interventional effects and related mechanisms of dendrobium officinalis spore powder on depressive symptoms in thyroid cancer patients”, and “research on the synergy and mechanism of functional factors of dendrobium officinalis in improving oral mucositis” to enable brand development.

Risk warning: The progress of marketing reforms has fallen short of expectations, and product sales have fallen short of expectations.