24Q1 revenue and profit are under pressure. 23 The company's revenue was 799 million yuan, +0.1% year on year, net profit to mother was 135 million yuan, -5.42% year on year, net profit after deduction of 131 million yuan, +2.07% year on year, and net operating cash flow of 172 million yuan, +9.5% year over year. It is proposed to distribute a cash dividend of 0.7 yuan (tax included) per share in '23. The 24Q1 company's revenue was 166 million yuan, -17.92% year on year, net profit to mother was 0.19 million yuan, or -46.94% year on year. Net profit after deducting net income to mother was 0.19 million yuan, or -46.36% year on year.

24Q1 gross margin declined and expense ratio increased. The company's gross profit margin in '23 was 26.38%, +2.3 pct year on year, mainly due to a decrease in raw material prices; sales expenses ratio of 5.01%, +1.16 pct year on year, mainly due to increased investment in personnel and marketing activities; management expense ratio of 5.85%, +1.52pct year on year, mainly due to increased cost sharing of personnel and use of new plants; financial expense ratio -2.79%, -0.72pct year on year, mainly due to an increase in interest income; net profit margin of 16.41% year-on-year, +0.32pct year on year. 24Q1 gross profit margin 25%, YoY -1.21pct; sales expense ratio 6%, YoY +1.69pct; management expense ratio 8.09%, +2.98pct yoy; financial expenses ratio -2.14%, -0.74pct yoy; net profit margin without deduction of 11.23%, YoY -5.96pct.

24Q1 Other Revenue +27.76% YoY. The 23-year revenue/23 revenue growth/24Q1 revenue growth rate were: meat and poultry 530 million yuan/ +0.57%/-21.36%, fishery products 210 million yuan/ -2.65%/-20.23%, and other categories 47 million yuan/ +5.62%/+27.76%, respectively.

The number of stores and wholesale customers increased steadily in 24Q1. The East China region's core revenue in '23 was 745 million yuan, -0.49% year over year. With the exception of Southwest China (revenue of 13 million yuan, +75.99% YoY), other regions were under pressure.

Each channel's 23-year revenue/23-year revenue growth/24Q1 revenue growth rate was: franchise stores: 428 million yuan/ +0.65%/-16.12%, dealership 0.97 million yuan/ -23.16%/-20.37%, wholesale 213 million yuan/ -1.5%/-24.89%, direct sales and other 0.14 million yuan/ +25.58%/-19.02%, and supermarket 33 million yuan/-25.04%. There was a net increase of 132/-7 franchisees in '23/24Q1, a net increase of 51/15, a net increase of 46/4 in supermarket customers, and a net increase of 98/12 in wholesale customers. At the end of the first quarter of '23, the number of franchisees, dealerships, supermarket customers, and wholesale customers was 1,816, 743, 87, and 547, respectively.

Multiple measures to optimize and expand channels. For retail channels, with East China as the focus, the “1+N” model was implemented from Tier 1 and 2 cities to Tier 3 and 4 cities and townships; for wholesale channels, the “1+N” model was implemented to develop large customers through cooperation with major dealers to achieve resource development in a piecemeal manner; and efforts will also be made simultaneously for channels such as supermarkets.

Profit forecasting and valuation. We expect the company's 24-26 EPS to be 0.74/0.84/0.89 yuan respectively, which is 16-44 times that of the company's 24-year PE. Considering that the prepared food industry is in a period of rapid development, the industry has more room for development, a certain valuation premium is given, and the company is given 40-45 times PE in 24 years, corresponding to a reasonable value range of 29.6-33.3 yuan, giving it a “superior to the market” rating.

Risk warning. The impact of price fluctuations in upstream raw materials; increased competition in the industry, etc.