The growth rate of the main zongzi business is stable, and the dividend ratio and dividend ratio have increased, maintaining the “increase” rating of Wu Fangzhai's revenue of 2.64 billion yuan in 2023, +7.0% year on year, and net profit of 170 million yuan to mother, +19.7% year on year.
2024Q1 revenue was 210 million yuan, -4.1% year on year, and net profit attributable to mother - 0.7 billion yuan, -9.1% year over year. The company's performance is in line with expectations, but considering that the company's non-rice dumpling business development falls short of expectations, we lowered our 2024-2025 profit forecast and added the 2026 profit forecast. The net profit for 2024-2026 is 2.0 (-0.8) billion yuan, 2.4 (-120) million yuan, and 270 million yuan respectively, +20.7%, +18.3%, and +15.9%, EPS is 1.39 (-1.36) yuan, 1.65 (-1.85) yuan, and 1.91 yuan respectively. The current stock price corresponds to PE 19.6, 16.6, 14.3 times The company's basic market for rice dumplings is stable. On this basis, the growth logic is clear. At the same time, in 2023, the company plans to pay a cash dividend of 140 million yuan and use cash to repurchase shares to include 50 million yuan in cash dividends, totaling 190 million yuan in cash dividends. The dividend ratio has been raised to 5%, maintaining the “increase in holdings” rating.
The basic growth of the rice dumpling business is steady. The peak sales season for zongzi in the second quarter is worth expecting rice dumpling revenue of 1.94 billion yuan in 2023, +11.1% over the same period. By enriching the categories and consumption scenarios of zongzi, the company ensures steady revenue growth in the main business. Mooncake revenue in 2023 was -4.3%, of which tonnage price was -6.9% YoY, mainly related to the restructuring of mooncakes. 2024Q1's revenue from rice dumplings/mooncakes/egg products, pastries and other businesses was -2.3%/-4.3%/-5.5%, respectively, mainly due to off-season consumer demand pressure. The 2024Q1 year-end contract debt was 370 million yuan, an increase of 290 million yuan over 2023Q4. The peak sales of Dragon Boat Festival rice dumplings in the second quarter are worth looking forward to.
Chain stores recovered rapidly in 2023, and e-commerce channels grew steadily in 2023 chain store/e-commerce store/supermarket/dealer/other channel revenue compared with +26.7%/+8.1%/-15.2%/+10.9%/-6.9%, respectively. Chain store growth rate was relatively good. Mainly due to companies increasing marketing activities and personnel incentives, store traffic continued to pick up; online e-commerce grew steadily, mainly due to companies strengthening cooperation with traditional e-commerce platforms and increasing resource investment in new platforms such as Douyin. 2024Q1 chain store/e-commerce revenue was -5.4%/-24.1% year-on-year, which is mainly expected to be related to the company's off-season channel layout and operating pace. Looking ahead to the whole year, it is expected that chains and e-commerce channels will continue to grow steadily as the peak sales season for rice dumplings and mooncakes approaches.
The decline in gross margin was compounded by an increase in the cost ratio. 2024Q1 net margin fell -1.10pct to 36.39% yoy in 2023, and the gross margin of 2024Q1 -0.39pct yoy to 34.28% yoy, mainly due to product restructuring. In 2023, the company improved its cost investment efficiency. The sales expense ratio decreased by 1.1 pct year on year, and the net interest rate was +0.64 pct year on year to 6.22%. The 2024Q1 sales expense ratio and management expense ratio were +1.32pct/+0.30pct, respectively. The decline in gross margin compounded the increase in the expense ratio, and the net margin was -4.03pct to -34.03% yoy.
As the peak sales season approaches in the second quarter, profitability is expected to improve due to the dilution of revenue scale.
Risk warning: macroeconomic downside risk, increased risk of market competition, risk of rising costs.