2023&1Q24 results are in line with market expectations
The company announced 2023 &1Q24 results: 2023 revenue of 1.901 billion yuan, +27.7% year on year; net profit to mother of 134 million yuan, +31.8% year over year. Among them, 4Q23 achieved revenue of 573 million yuan, +25.0% year on year; net profit to mother was 40 million yuan, +24.2% year over year. The 1Q24 company achieved revenue of 464 million yuan, +8.0% year on year; net profit to mother was 35 million yuan, +14.2% year over year. 2023&1Q24 results are in line with market expectations.
Development trends
The big B side performed well in 2023, dragging down the overall 1Q24; the small B side performed steadily. In 2023, Big B's revenue was 780 million yuan, an increase of nearly 50%. The largest customer, Yum Sheng, contributed 404 million yuan in revenue, an increase of 68.5%, due to the rapid expansion of Yum Sheng stores, and an increase in the share of old products and more new products; other major customers, Wallace, Haidilao, and Hometown Chicken, maintained rapid growth; and the number of major customers also increased by 43 to 197. Due to 1Q24's high base and changes in the management strategies of leading customers, we expect big B-side revenue to drop by about 10%, dragging down the overall growth rate. Small B-side revenue in 2023 was 1.12 billion yuan, up 15.7% from the same period. The company continues to promote the strategy of “focusing on in-depth service for major customers” and “expanding channel providers”. The number of dealers also increased by 389 to 1,541, and the top 20% of dealers contributed 18.4% to revenue. 1Q24 We expect Little B's income to grow by more than 15%, mainly due to actively seizing the Spring Festival banquet scene and intensive channel development.
Gross margin improved year over year, and operating net profit margin remained stable. The gross margin increased by 0.3 ppt in 2023, mainly due to improved gross margin of distribution channels, a decrease in the cost of steamed dumplings and an obvious scale effect; the sales expense ratio increased by 0.8 ppt, mainly due to the acceleration of dealer business expansion, the increase in sales staff, and the increase in promotion fees for online sales platforms; excluding the impact of equity incentives, net profit to the mother in 2023 was 148 million yuan, +27.64% over the same period last year, and profitability remained stable. 1Q24's gross margin improved by 1.5ppt year on year, sales and management expense ratios increased by 0.8ppt and 0.5ppt, respectively, and net profit margin to mother improved by 0.4ppt year on year.
Looking forward to the future: The B-end quick-frozen rice, noodles and prepared dishes industry is still growing rapidly. At this stage, the company mainly focuses on sales scale. On the channel side, the company deeply cultivates Big B customers and focuses on core dealers. On the product side, the company focuses on building four core product lines, focusing on core scenarios such as breakfast, banquets, group meals, and takeout. The company's Xinxiang Phase III was put into operation in September 2023. We expect the 2024 fixed increase production expansion project to be implemented. We believe that the company is expected to maintain a revenue growth rate of more than 15%.
Profit forecasting and valuation
Considering weak demand, 2024 revenue was reduced by 10.0% to 2.22 billion yuan, and 2025 revenue of 2.64 billion yuan was introduced; considering factors such as revenue adjustments and competition, net profit due to mother was reduced by 15.5% to RMB 169 million in 2024, and net profit of RMB 211 million was introduced in 2025. The current stock price was traded at 21/17 times P/E valuation in 2024/25. Considering profit forecasts and sector valuation adjustments, the target share price was lowered by 39.3% to 42.5 yuan/share, corresponding to the 2024/25 25/20 times P/E valuation. There is 20.8% upside compared to the current stock price. Maintain outperforming industry ratings.
risks
Tuke falls short of expectations, new product development falls short of expectations, competition heightens risks, and food safety issues.