Event: The company released results for the year 2023 and the first quarter of 2024. In 2023, the company achieved revenue of 14.045 billion yuan, +15.29% year over year; net profit to mother of 1,478 billion yuan, +34.24% year over year; net profit after deducting non-return to mother of 1,365 billion yuan, +36.80% year over year. Among them, 2023Q4 achieved revenue of 3.774 billion yuan, -6.27% year on year; net profit to mother of 356 million yuan, -13.41% year over year; net profit after deducting non-return to mother of 338 million yuan, -13.93% year on year. 2024Q1 achieved revenue of 3.755 billion yuan, +17.67% year over year; net profit to mother of 438 million yuan, +21.24% year over year; net profit after deducting non-return to mother of 420 million yuan, +21.56% year over year.
The main business revenue grew steadily, and the core channel performed well. (1) By product, the company achieved revenue of 25.45/26.27/44.09/3,927 billion yuan in 2023, respectively, or +5.4%/+10.22%/+11.76%/+29.84%. Among them, the rapid growth of cooking products was mainly due to the increase in the Xinliu Wu merger and Chef Yasui series products. The slowdown in the growth of noodle and rice products was mainly affected by the supermarket channel market environment.
Revenue from 24Q1 frozen rice and noodle products/ meat products/ surimi products/ dish products was +4.42%/+27.73%/+31.48%/+12.27%, respectively. The rapid growth rate of surimi products was mainly due to the increase in the new Marunoshizun series products and the increase in sales of the freshly packed series products, and the company's main business grew steadily. (2) By channel, the revenue of dealer/Tecom direct-business/e-commerce channels in 2023 was +15.96%/+28.88%/+145.92%, respectively. The main reason was that companies increased channel development and the combined influence of Xinliuwu. Among them, the dealer channel accounted for 81% of revenue in 2023, which is still the core channel; the year-on-year sales of supermarket channels -13.42% were mainly affected by factors such as a decrease in supermarket traffic. 24Q1 dealer/supermarket/TTM direct/e-commerce channel revenue was +22.61%/-6.28%/+0.02%/+35.61%, respectively. Dealer channels grew steadily, and sales of interested e-commerce platforms increased significantly.
The scale effect helps increase gross profit, and the efficiency of fee control boosts the level of net profit. In 2023/24Q1, the company's gross margin was +1.25/+1.84pct to 23.21%/26.55%, respectively, mainly benefiting from factors such as reduced raw material costs, scale effects, and product structure upgrades. On the cost side, in 2023, the company's sales/management/R&D/finance expense ratios were -0.57/-0.07/-0.09/-0.02pct, respectively. Mainly due to the continued expansion of the company's scale effect and the increase in interest income, etc., the company's cost control capacity steadily improved. 24Q1 sales/management/finance expense ratios were +0.09/+0.30/+0.16pct, respectively. Taken together, the net interest rate of the company in '23/24Q1 was +1.49pct/+0.34pct year-on-year, respectively, to 10.52%/11.68%, respectively, and the net interest rate to mother in 24Q1 reached a record high.
The development plan for the main frozen business is clear, and second-curve prepared dishes are booming. The company sticks to the main frozen food business. On the one hand, it widens the gap with major competitors and increases market share in open small B-side channels with advantages; on the other hand, it conforms to the trend of high-end C-side development, increases profitability through product structure upgrades, and leads the upgrading of the industry. The company continues to focus on the strategic core of creating popular products, continuing to advance to the middle and high-end routes through the Sukiyoshimasu, Shrimp Paste, and Marunosun series, increasing its market share in the regional market through “locking in” regional products, and making every effort to promote enterprise development and brand building. At the same time, the company entered the rapid growth segment of the industry by adding prepared dishes and sausage products. Through BD balance, the company made full efforts to achieve annual revenue of +29.84% to 3,927 billion yuan in 2023, accounting for 27.96% of revenue. We believe that the company has comprehensive advantages in product research and development, channel promotion, brand operation, etc., and has sufficient potential for long-term development.
We are optimistic about the company's steady development and maintaining a “buy” rating. As the external environment gradually picks up and scale effects continue to show, we believe the company will continue to grow steadily in 2024. According to the company's 2023 annual report and 2024 quarterly report, we expect the company to achieve revenue of 162.14/187.02/21,472 billion yuan in 2024-2026, +15.3%/14.8% year over year; net profit to mother of 16.79/19.79/2,316 billion yuan, +13.6%/17.1% year over year; corresponding to PE 15/12/11X, maintaining a “buy” rating.
Risk warning: the cost of raw materials has risen sharply; food safety risks; new product promotion falls short of expectations, etc.