Core views
The company's downstream baking industry has maintained a steady recovery trend over the past 23 years. Consumption scenarios and consumption channels have become more diversified. The company has adapted to the development trend, actively adjusted development strategies, and sorted out and optimized all aspects of R&D, production and marketing. Despite a slowdown in 23Q4 growth, overall growth remained good throughout the year, and the overall 24Q1 sales side showed signs of marginal improvement. By channel, sales in distribution channels were basically flat year over year, but 24Q1 recovered, driven by new cream products; supermarket channels benefited from improved sales growth from core supermarket customers in 23 years, while sales declined year-on-year in 24Q1 under a high base; while catering and new retail channels continued to grow rapidly as the company strengthened customer expansion.
occurrences
The company announced its 2023 Annual Report & 2024 First Quarter Report:
In 2023, the company achieved revenue of 3.499 billion yuan, a year-on-year increase of 20.22%; net profit to mother was 73 million yuan, a year-on-year decrease of 49.21%; net profit after deducting non-return to mother was 122 million yuan, a year-on-year decrease of 14.95%.
In the 23Q4 single quarter, the company achieved revenue of 917 million yuan, a year-on-year increase of 6.67%; net profit to mother was -85 million yuan, a year-on-year decrease of 297.22%; net profit after deducting non-return to mother was -024 million yuan, a year-on-year decrease of 148.83%.
In the 24Q1 quarter, the company achieved revenue of 916 million yuan, an increase of 15.31% year on year; net profit to mother was 77 million yuan, up 53.96% year on year; net profit after deducting non-return to mother was 68 million yuan, an increase of 40.29% year on year.
Brief review
Market demand has been steadily recovering, and new channels such as catering have maintained high growth
The company's downstream baking industry has maintained a steady recovery trend since 23 years. Consumption scenarios and consumption channels have become more diversified. The company has also adapted to the development trend, actively adjusted development strategies, and sorted out and optimized various business aspects of R&D, production and marketing. Although the 23Q4 growth rate has slowed, it has maintained good growth throughout the year, and the overall 24Q1 sales side has shown signs of improvement. By product, the company's frozen baking sales in '23 (accounting for 63.18%) increased 23.93% year on year, mainly due to the scale growth contribution of core supermarket customers and some catering customers; while the baking ingredients business (accounting for 36.06%) benefited from the launch of new whipped cream products, sales increased 12.71% year over year. As far as 24Q1 is concerned, sales of the company's frozen baking (accounting for about 61%) were basically flat year over year, while sales of baking ingredients (accounting for about 39%) increased by about 56% year on year, with the cream sector doubling. By channel, sales of the company's traditional distribution channels (accounting for about 55%) were basically flat year on year in '23. The supermarket channel (accounting for about 30%) benefited from improvements in core single product sales and the contribution of some new products from the core supermarket channel, increasing by about 50% year on year. Meanwhile, innovative channels such as restaurants, tea, and new retail (accounting for about 15%) nearly doubled year-on-year sales as the company increased its development of new customers. As far as 24Q1 is concerned, the company's distribution channels (accounting for about 51%) have recovered, with sales increasing by nearly 25% year on year; supermarket channels (accounting for about 31%) sales declined by high year-on-year numbers, mainly due to the increase in the number of people returning home in high-tier cities during the Spring Festival, compounded by the impact of the high base during the same period; while catering and new retail channels (accounting for about 17%) continued their rapid growth trend, with a year-on-year increase of more than 50%.
Profit performance was under pressure in '23, and there was a marginal improvement in 24Q1
The company's gross margin fell 4.26/0.38 pcts year on year in 23Q4/23. Under the overall improvement in raw material costs, the year-on-year decline in gross margin was mainly related to the strengthening of phased discount promotions and increased depreciation and amortization. In terms of expenses, the company's 23Q4/23 sales rate increased by 5.99/1.62 pcts year-on-year, mainly due to an increase in mainline transportation costs and marketing expenses; the management rate increased 6.41/1.05 pcts year over year. In addition to the impact of accelerated share payment expenses, the increase in management rates was mainly related to the increase in employee remuneration and project transformation depreciation costs. In addition, the company's 23Q4/23 R&D rate changed to -0.05/+0.02pcts, and the year-on-year change in the financial rate was +0.67/+0.62pcts. The large increase in the financial rate was mainly due to the increase in interest payable on bonds due to the issuance of convertible bonds in the current period. In addition, some inventory impairment losses that occurred during the new product capacity climbing phase also had an impact on profits in '23. In the end, the company's net profit margin fell 2.85 pcts to 2.09% year on year, and after excluding the impact of share incentive fees, the net return rate fell by about 2.24 pcts to 5.31% year on year. The increase in cost side expenses put pressure on the company's profitability in 23 years. As far as 24Q1 is concerned, the company's gross margin increased by 0.56 pcts year on year. The improvement in gross margin was mainly due to the reduction in the average procurement price of raw materials and the year-on-year increase in capacity utilization due to the optimization of the company's procurement model; in terms of expenses, sales/management/R&D/finance rates were +0.20/-0.13/-0.03pcts year on year, and the management rate decreased mainly due to a decrease in share payment fees. The remaining rates remained stable. Eventually, the company's net profit margin increased 2.10% to 8.38% year on year.
Focus on improving operational efficiency and expect continuous improvement in performance
The company reshaped its organizational structure in 23 years from multiple dimensions such as products, channels, and supply chains, and implemented channel integration to improve the efficiency of new product development. However, against the backdrop of a slow pace of improvement in the external business environment, it still faced problems such as low investment efficiency during the run-in phase of reform, putting great pressure on the company's short-term performance.
In 24, the company will optimize its business strategy, use large single products, large customers, and large dealers as a starting point, firmly promote multi-channel and multi-category development strategies, and pursue balanced development of production efficiency and channel expansion. In terms of cost investment, the company will also strictly implement rolling budget management to effectively control expenses. At the same time, further adjustments will be made in supply chain links such as procurement, production, and logistics to consolidate management responsibilities at all levels, improve operational efficiency, and continue to explore the potential for cost reduction and efficiency. With the gradual improvement of the sales side, it is expected to promote the continuous improvement of the company's performance.
Profit forecast: According to the company's financial statements, we expect the company to achieve revenue of 43.06, 52.13, and 6.229 billion yuan in 2024-2026, and achieve net profit of 3.14, 4.01, and 497 million yuan, corresponding EPS of 1.85, 2.37, and 2.94 yuan/share. If equity incentive costs are restored, the net profit due to mother is estimated to be 328, 4.11, and 503 million yuan for 24-26, corresponding EPS of 1.93, 2.43, and 2.97 yuan/share.
Risk warning: 1) Risk of rising raw materials in the baking industry: There are many types of raw materials involved in the bakery industry. If the prices of some raw materials such as oil, sugar, etc. later rise beyond expectations, it will put a lot of pressure on the company's profits; 2) Industry competition intensifies: the domestic frozen bakery industry is currently in a period of rapid growth. Market participants have expanded production one after another. If competition within the industry continues to increase, it will adversely affect the company's operations; 3) New product performance falls short of expectations; 3) New product performance falls short of expectations; if the company's new product market performance falls short of expectations, Push The new pace has been affected, which will have an impact on the company's subsequent growth on the performance side.