On April 26, 2024, Youyou Foods released its results report for the first quarter of 2024.
Key points of investment
Revenue grew, and costs dragged down profits in the short term
The company's total revenue for 2024Q1 was 275 million yuan (up 18% from the same period), and net profit to mother was 43 million yuan (down 9% from the same period). 2024Q1 gross margin decreased by 2 pcts to 31.43% due to increased channel costs and high raw material costs required to build a new retail team. The 2024Q1 sales/management expense ratio was 11.76%/3.69%, respectively, +2pcts/1pct year over year. The sales expense ratio increased year on year. It is expected to be due to an increase in brand marketing expenses. In the short term, the company will focus on advertising expenses. In the short term, the increase in sales expenses is expected to drag down the profit side to a certain extent. Taken together, the 2024Q1 net margin also decreased by 5pcts to 15.74%.
Strong four single products, impressive online growth
By product, 2024Q1 pickled pepper, chicken claw/pork skin crystal, bamboo shoots, chicken wings, dried tofu, peanuts/other products were 2.09/0.22/0.14/0.11/0.06/0.03/0.06 billion yuan, respectively, +19%/+26%/-4%/-8%/-15%. The company actively enters new media platforms for promotion and sales. Subsequently, the company selected some potential products to be imported into various channels, and mainly promoted member companies to become high-profile brands. Looking at the subregions, 2024Q1 revenue for Southwest China/East/Northwest/South China/North China/Central/Northeast China was 1.49/0.74/0.15/0.12/0.10/0.08/0.04 billion yuan, respectively, +9%/+41%/-0.1%/+45%/+7%/+20%/+6%. By channel, 2024Q1's online/offline revenue was 0.13/259 million yuan, up 173%/14%, respectively, and online channels achieved high growth. The total number of dealers at the end of 2024Q1 was 745, a net increase of 79 over the beginning of the year. The offline market continues to be consolidated by increasing the scale of dealers. At present, the company has prepared a basic team for new retail. It is expected that the company will vigorously embrace affordable chains and develop new retail channels in 2024.
Profit forecasting
We are optimistic that the company will consolidate its basic market and continue to build a second growth curve. According to the first quarterly report, EPS for 2024-2026 is expected to be 0.33/0.37/0.42 yuan respectively, and the current stock price is 19/17/15 times PE, respectively, maintaining a “buy” investment rating.
Risk warning
Macroeconomic downturn risks, new product promotion falling short of expectations, risk of rising raw materials, growth of large products falling short of expectations, etc.