Key points of investment:
Event: The company released its 2023 annual report. In 2023, the company's revenue was 1.9 billion yuan, up 27.7% year on year, net profit to mother was 130 million, up 31.4% year on year, and net profit without return to mother was 120 million, up 27.2% year on year. In a single quarter, 23Q4 revenue was 570 million, up 25% year on year, net profit to mother was 40 million, up 24.1% year on year, and net profit after deducting non-return to mother was 40 million, up 26.5% year on year. Revenue was in line with expectations, and profit was lower than expected. The dividend plan is to pay 1.9 yuan for every 10 shares, accounting for 14% of net profit returned to mother in '23.
The company released its quarterly report for the year 24. In 24Q1, the company's revenue was 450 million yuan, up 8% year on year, net profit from mother was 35 million, up 14.2% year on year, after deducting net profit of 34 million yuan, up 14% year on year. Revenue was lower than expected, and profit was slightly lower than expected.
Investment rating and valuation: Taking into account the weak recovery and the impact of major customers, the 2024-25 profit forecast was slightly lowered, adding 2026. The predicted profit for 2024-26 was 1.7, 2.1, and 250 million (210 million and 270 million in the previous 24-25 years), with year-on-year increases of 28%, 24%, and 17%, respectively. The current stock price corresponding to 2024-26 PE is 21x, 17x, and 14x, respectively, giving the restaurant chain 24 times PE compared to the company, with a target market value of 4.14 billion yuan compared to the closing market on April 29, 24 The value has room to increase by about 16.2%, maintaining the buy rating. As the earliest B-side quick-frozen rice track in China, the company has the brand endorsement of Yum China's T1 supplier, and is expected to benefit from the increased chain rate of restaurants in China and the dividends of high channel stickiness in the future. In terms of direct sales channels, the company will further expand the existing product line for major customers and continue to develop other chain customers; in terms of distribution channels, support strategic dealers to grow bigger and stronger, and continue to develop catering dealers. For product planning, the company will build multiple 100 million yuan large-scale single product matrices and gradually explore C-side products. Under the two-wheel drive of channels and products, the company is expected to consolidate its first-mover advantage and open up medium- to long-term growth space.
23 years ended successfully, and 24Q1 Big B customers were disrupted for a short time. According to the 2023 annual report, by sales model, the company's direct management and distribution achieved revenue of 780 million yuan and 1.12 billion respectively, up 49.9% and 15.7% year-on-year respectively. Among them, the company's sales revenue to the top three customers was 400 million, 130 million and 68 million, respectively, up 68.5%, 59.5% and 43.1% year-on-year respectively. It is expected to mainly benefit from the rapid recovery of low base and leading catering customers. By product, the company's revenue in 23 was 8.7/3.6/3.7/295 million, up 24.2%/29.2%/26.4%/38.6% year-on-year respectively. Among them, the increase in deep-fried products was lower than the company's overall growth rate, mainly due to the slow growth rate of fritters in core customers, and the current market share of the core single product, sesame balls, is limited.
According to the 2024 quarterly report, 24Q1's revenue performance is lower than expected. Among them, sales of the small B channel are expected to maintain double-digit growth, while the performance of the big B channel is under pressure, mainly due to the largest customer 1) 24Q1 same-store revenue pressure, 2) the high base of promotion of some single products in the same period last year, and 3) diversifying catering suppliers to reduce costs and increase efficiency, dragging down the sales performance of Qianwei single products. Looking ahead to 2024, the Big B side is still expected to be disrupted in the short term due to base figures, but the second half of the year is the peak sales season and is still expected to catch up with the annual growth rate; the small B side is the core gripper for the company's medium- to long-term growth. The company will continue to focus on in-depth services for large merchants and jointly develop catering terminals based on team and dealer construction in 23 years to achieve large-scale effects.
Profitability was stable in '23 and 24Q1. According to the 2023 annual report, the company's gross margin for 23 was 23.7%, up 0.3 pct year-on-year. In terms of cost ratio, the 23-year sales/management/R&D/finance expense ratio was 4.7%/8.4%/1.1%/0.3%, respectively, +0.8/-0.9/+0.05/+0.2pct. The net interest rate for the year 23 was 7.1%, up 0.2 pct year on year, and profitability remained stable.
According to the Q1 2014 report, the 24Q1 company's gross margin was 25.5%, an increase of 1.5pct over the previous year. In terms of cost ratio, 24Q1 sales/management/R&D/finance cost rates were 5.9%/8.4%/1.1%/-0.1%, respectively, +0.8/+0.5/+0.2/-0.4pct. Net profit margin for 24Q1 was 7.5%, up 0.4 pct year over year. Looking ahead to 2024, short-term market competition has intensified, and the company did not follow suit in the first quarter, resulting in a slight year-on-year increase in profit margin. Entering the second quarter, the company adjusted its competitive strategy, but it will still balance revenue and profit margins, and profit margins are expected to remain stable throughout the year.
Catalysts for stock price performance: product price increases, customer development exceeds expectations, new product performance exceeds expectations. Core hypothetical risks: downstream demand falls short of expectations, food safety risks, rising raw material prices