Key points of investment
The company announced the 2023 Annual Report and 2024Q1 Quarterly Report:
The company achieved revenue of 3.75 billion yuan (+15.4% YoY), achieving net profit of 233 million yuan (YoY +120%); of these, 23Q4 achieved revenue of 1,035 million yuan (+28% YoY), achieving net profit of 56 million yuan (loss to profit); 24Q1 achieved revenue of 888 million (+24% YoY), and achieved net profit of 56 million yuan (YoY +259%), with impressive performance.
OEM repair, steady growth of independent brands
By product: 1) Snacks: Achieved revenue of 2,351 billion yuan in 23 years, +10% year-on-year, gross profit margin of 25.39%, with a significant increase in profitability due to increased capacity utilization, price decline and exchange rate contributions; 2) Main food: Achieved revenue of 577 million yuan in 23 years, +60% year over year. With the release of factory capacity and the implementation of the company's focus on staple food strategies, revenue grew rapidly. The gross profit margin was 29.1%, +8.61 pct year-on-year. As sales increased scale efficiency showed, with the company's channel and product structure adjustments Significant improvement, 3) Canned pet food:
In '23, we achieved revenue of 635 million yuan, +5.76% year over year, gross profit margin of 32.62%, and +6.21pct year on year. Raw material prices fell and exchange rates contributed significantly.
By region: 1) Domestic: achieved revenue of 1,081 billion yuan, with a clear brand matrix and steady growth. The leading and playful growth is expected to remain steady. The marginal optimization continues under Zeal channel price control adjustments. The gross profit margin is 31.28%, +3.51 pct year over year, and related adjustment effects are gradually showing; 2) Overseas: achieved revenue of 2,533 billion yuan, +12.89% year over year. In addition, the OEM model achieved steady growth in 23 years (OEM model achieved revenue of 2.15 billion yuan, +14.45% year over year). Go out to sea Contribution increase, gross profit margin of 25.22%, +7.97% year over year. Profitability improved significantly as raw material prices declined.
Domestic sales channel adjustments and export supply chain improvements drove profit improvement of 26.3%, year-on-year gross profit margin of 26.3%, year-on-year net profit margin of 6.22%, +2.96pct year-on-year, 24Q1 gross profit margin 27.85%, year-on-year +3.49pct, net interest rate to mother 6.4%, +4.18% year-on-year. The scale effect of domestic and foreign sales was evident, and channel supply chain adjustments drove improved profitability.
Domestic sales: channel adjustment, profitability restoration. In '23, the company actively promoted actions such as channel price control. In addition, the adjustment of product categories, the stabilization of the product price market, and the upgrading of the product structure also contributed to the increase in gross margin, stabilizing the basic market for the strong strength of the company's own brands in the later stages.
Export sales: Raw materials and exchange rates contributed significantly, and supply chain value control measures were implemented. In '23, the company actively selected and optimized orders, and scheduled production of orders with high gross margins. Furthermore, with its R&D strength and service quality, the company incorporated innovative research and development into all aspects of order production, increasing the added value of products and further enhancing the gross margin and profitability of the business. On the cost side, profitability also increased as raw material prices declined.
The playful brand is being adjusted, waiting for the results to be released
Currently, Wanpy, the company's core independent brand, is undergoing adjustments. On the one hand, the SKU structure is being optimized, and on the other hand, during the channel optimization and adjustment process, judging from our online tracking, there is slight pressure on the growth of the Playful Brand. We look forward to steady growth after the adjustments are implemented.
Overseas warehousing has come to an end, and export OEM is growing steadily
In January-February, China's pet food exports were +37% year-on-year. As downstream customers gradually replenish stocks and add a low base of 22Q4-23Q1, pet food export sentiment increased. It is expected that Q2 pet food exports will continue to prosper as stock replenishment continues.
Profit forecasting and investment advice
We expect the company to achieve revenue of 42.6/48.5/5.56 billion yuan in 24-26, +14%/15% year-on-year, and achieve net profit of 2.8/3.35/416 million yuan, respectively, +20%/24% year-on-year, corresponding to PE26/22/17X, maintaining the purchase rating.
Risk warning
Exchange rate fluctuation risk; raw material price fluctuation risk; domestic competition increases risk.