Key points of investment

The company's equity incentive goals were successfully completed, the 2023 performance achieved rapid growth, and 24Q1 revenue remained steady. We look forward to new breakthroughs in ready-to-drink and the continued development of the brewing business.

The 2023 performance continued to grow rapidly, and 24Q1 revenue remained steady. In 2023, the company achieved revenue of 3.625 billion yuan, +15.90% year over year; net profit to mother was 280 million yuan, +31.04% year on year.

2024Q1 achieved revenue of 725 million yuan, +6.76% year over year; realized net profit of 25 million yuan, +331.26% year over year.

2024Q1 brewing remained steady, and the ready-to-drink business achieved rapid growth. In 2023, the company's brewing category reached 2,686 million yuan, +9.37% year over year; ready-to-drink products reached 901 million yuan, +41.16% year over year. In 2024, Q1's brewed products reached 485 million yuan, +5.46% year over year; ready-to-drink products reached 234 million yuan, +10.12% year over year.

The company's brewing business has launched healthy products such as “like fresh” handmade oat milk tea and “fresh coffee” handmade oat lattes, and continues to lead the trend of brewing product upgrades. The ready-to-drink business Meco juice tea and frozen lemon tea continued to break through, increasing product potential.

The company's gross profit margin increased year on year in 2023, and 24Q1 profitability continued to increase the company's gross profit margin by 37.53% in 2023, +3.73 pct year on year. The increase in gross margin was mainly due to a reduction in raw material costs, which combined with the company's size effect. 2024Q1 achieved 33.64%, +2.62 pct year over year.

The company's net interest rate in 2023 was 7.72%, +0.88pct year on year; 2024Q1 achieved 3.49%, +2.63pct year on year.

The increase in the company's sales expenses rate in 2023 was mainly due to the company's increase in the manpower expenditure and marketing promotion of the ready-to-drink team, which achieved an increase of 23.73%, an increase of 5.8pct; in 24Q1, it decreased by 2.81 pcts to 24.01%.

The company successfully completed its equity incentive goals. The new president brought new momentum to the development of the company's previous options incentive plan. The first exercise was granted with a revenue growth rate of not less than 15% in 2023, which has now been successfully completed. At the same time, the company's new general manager, Mr. Yang, has many years of experience in the FMCG industry, which is expected to bring new changes and inject new development momentum into the company.

Maintaining a buying rating

We expect the company to achieve revenue of 42.54/49.32/5.698 billion yuan respectively in 2024-2026, 17.35%, 15.94%, and 15.54% year-on-year; realized net profit to mother will be 3.49, 4.45, and 569 million yuan, respectively, 24.38%, 27.71%, and 27.77% year-on-year, respectively, corresponding PE 20.72/16.23/12.70 times, respectively.

Risk warning: Channel expansion falls short of expectations, fluctuating raw material costs, food safety and other risks.