Key points of investment
Performance review: The company's revenue and net profit to mother achieved month-on-month growth for two consecutive quarters.
With 2024Q1, the company achieved revenue of 104.6 billion yuan, qoq +15.7%; net profit to mother was 410 million yuan, qoq +3.8%. Due to the company's high performance base in 2023Q1, revenue and profit declined year-on-year: 2024Q1 revenue was -19% YoY; Net Profit to Mother -25% YoY.
The profit margin remained stable: 2024Q1, the company's gross margin/net sales margin was 1.85%/0.51%, -0.28pct/ -0.08pct year-on-year. The company's sales/management/financial expense ratios were 0.55%/0.29% 0.48%, respectively, +0.13/ -0.01/ +0.10pct year-on-year. Profit margins remained flat year over year, or reflect the company's internal adjustments being basically in place. After waiting for the business environment to recover and revenue to pick up, total profit is expected to recover.
The company's profit declined year-on-year, mainly due to short-term reasons and the macro environment: ① The company's performance base was high during the 2023Q1 period. Since then, the gross margin of the agricultural products sector declined due to falling raw grain prices and lower inventory by downstream customers. The gross margin of agricultural products in 2023 was -0.89%, -3.61 pct year on year; agricultural product profits are expected to recover in 2024 as the business environment improves and the company adjusts its business strategy; ② Effective demand for commodities is insufficient, and unit prices in the commodity operating sector declined. We believe Q1 is generally a relatively low season for the commodity supply chain industry. The company achieved a month-on-month improvement in performance in 2024Q1, sending a signal that operations have bottomed out, and we look forward to further verification of the results of the subsequent peak season from Q2 to Q3.
We are still optimistic about opportunities for increasing the concentration of leading enterprises in the industry: as the quality and efficiency of China's B2B supply chain continues to advance, the market share of leading companies with higher efficiency continues to increase. According to the company's annual report, measured in terms of volume, the CR5 market share of China's bulk supply chain rapidly increased from 4.81% in 2021 to 5.46% in 2023H1. The overall volume (in tons) of the company's commodity business in 2023 was +13.74% year-on-year, and the market share continued to increase.
Profit forecast and investment rating: The company's valuation is low, dividend rate and dividend rate are high, short-term performance is expected to bottom out and be repaired, and the long-term growth logic is clear. We maintained the company's net profit from 2024-26 at 19.2/23.3/ 2.69 billion yuan, a year-on-year growth rate of 22%/21%/16%, and the P/E valuation corresponding to the closing price on April 29 was 8/7/6 times. Maintain a “buy” rating.
Risk warning: commodity price fluctuations, poor downstream demand, new categories and models falling short of expectations, etc.