Key points of investment:
Event: The company released its 2023 annual report. In 2023, the company's revenue was 3.21 billion yuan, up 31.6% year on year, net profit to mother was 53 billion, up 54.2% year on year, and net profit after deducting non-return to mother was 5.3 billion, up 56.7% year on year. In a single quarter, 23Q4 revenue was 875 million, down 0.8% year on year, net profit to mother was 143 million, down 8.5% year on year, and net profit after deducting non-return to mother was 144 million, down 7.8% year on year. Revenue and profit were slightly lower than expected. The dividend plan is to distribute 3 yuan for every 10 shares. Combined with the profit distribution for the first three quarters of 2023, a total of 514 million yuan was distributed in 2023, accounting for 96.9% of net profit returned to mother in 2023.
The company released its quarterly report for the year 24. In 24Q1, the company's revenue was 895 million yuan, up 9.3% year on year, net profit to mother was 155 million, up 6.7% year on year, after deducting net profit of 152 million yuan, up 4.7% year on year. Revenue was in line with expectations, and profit was lower than expected.
Investment rating and valuation: Taking into account the short-term product structure impact due to channel expansion, the 2024-25 profit forecast was slightly lowered, adding 2026, and forecasting net profit for 2024-26 to be 680 million, 800 million, and 1.02 billion (previous 2024-25 was 690 million and 850 million), respectively, up 28%, 24%, and 21% year-on-year respectively. The current stock price corresponding to 2024-26 PE is 23x, 19x, and 16x, respectively, maintaining the purchase rating. In the short term, 2C consumers' health awareness is increasing, which is expected to establish 2C consumers' awareness and acceptance of zero additives. As a condiment company with zero additives as the core, the company's revenue side performance and brand image are expected to fully benefit. In the medium term, the product structure upgrade and the fall in upstream raw material prices are expected to drive the company's profitability into an upward channel. In the long run, since '22, the company has actively laid out foreign port markets and traditional distribution channels, and has steadily promoted nationwide expansion and channel improvement. As consumers' awareness of health increases, it will further open up room for the company's long-term growth.
23 years ended successfully, and 24 years of continuous operation as a trawler. According to the 2023 annual report, by category, the company 1) Soy sauce achieved revenue of 2.04 billion yuan, a year-on-year increase of 34.9%; volume and price changes of +33.2% and +1.2% year-on-year respectively, mainly benefiting from the increase in zero-additive distribution and revenue share; 2) Table vinegar achieved revenue of 420 million, up 11.8% year on year, volume and price, respectively; 3) Other main businesses achieved revenue of 700 million, an increase of 39% year on year. It is expected to mainly benefit from the performance of the caramel color and Big B customization business. Looking at the subregions, East/South/Central/North/West respectively achieved revenue of 712 million/208 million/449 million/567 million/1,229 million in 2023, +30.9%/+26%/+81%/+27.1%/+23.8%, respectively.
In terms of dealers, there was a net increase of 1,020 to 3,250 in 23. It is expected that the main reason is increased business development efforts to increase channel coverage and core market channel segmentation in the foreign port market.
According to the 2024 quarterly report, by category, 24Q1's soy sauce/vinegar/other achieved revenue of 568 million/113 million/214 million, respectively, or +9.1%/-6.2%/+20.3% year-on-year. Looking at the subregions, 24Q1 companies' east/south/central/north/west revenue was +4.4%/+43.3%/+28.4%/+10.5%/-0.7%, respectively. Looking ahead to 2024, it is expected that the company will continue to rely on Volkswagen Zero Plus for offline sales and network expansion. The number of the company's terminal outlets is expected to continue its 23-year high growth performance in 24. At the same time, the company will maintain a high-frequency dynamic assessment of dealers to ensure the quality of the dealer team and support continuous high-quality growth performance for 24 years.
Gross margin is under pressure due to the 24Q1 product structure, and profitability is expected to remain stable throughout the year. According to the 2023 annual report, the 2023 company's gross margin was 37.1%, an increase of 0.6 pct over the previous year. It is expected that the increase in zero additions will drive the upgrading of the product structure. In terms of expenses, sales expenses in 2023 were 392 million (+12.22% yoy), of which employee remuneration and promotion and advertising expenses were +22.6%/+5.9%, respectively. In 2023, the company's sales/management/ R&D/ finance ratio was 12.22%/3.87%/2.70%/-0.85%, with year-on-year changes of -1.36/+0.87/+0.05/-0.51 pct, respectively. In 2023, the company's net profit margin was 16.5%, up 2.4 pct year-on-year.
According to the 2024 quarterly report, 24Q1's gross margin was 35.96%, down 3.07pct from the previous year, mainly due to 1) benefiting from the influence of competitive public opinion in the same period last year, with zero additions accounting for a high share, 2) 24Q1 used popular zero-addition matching channels, and 3) the cost reduction effect lagged behind due to the lengthening of the product brewing cycle. In terms of expenses, 24Q1's sales/management/R&D/finance expenses ratio was 11.8%/2.7%/2.8%/-1.3%, with year-on-year changes of +0.1/-0.9/-0.2/-1.1 pct, respectively.
In 24Q1, the company's net profit margin was 17.3%, a year-on-year decrease of 0.4 pct. Looking ahead to 2024, considering the company's brewing cycle, cost reduction dividends are expected to appear quarterly in 24Q2, while the costs required to develop traditional distribution channels are relatively low, and the overall cost rate is expected to be manageable.
Catalysts for stock price performance: core product growth exceeds expectations, product price increases core
Hypothetical risks: Product price increases affect sales, food safety incidents