Incident: Tong Ren Tang released its 2024 quarterly report. 2024Q1 achieved revenue of 5.267 billion yuan, a year-on-year increase of 2.42%, achieved net profit to mother of 576 million yuan, an increase of 10.04% over the previous year, and achieved deducted non-net profit of 571 million yuan, an increase of 9.98% over the previous year.
Comment:
Revenue growth slowed in 24Q1 due to a high base, and the profit side grew steadily. According to the company's announcement, 2024Q1 achieved revenue of 5.267 billion yuan, a year-on-year increase of 2.42%, achieved net profit to mother of 576 million yuan, an increase of 10.04% over the previous year, and achieved deducted non-net profit of 571 million yuan, an increase of 9.98% over the previous year. The relative slowdown in revenue growth was mainly affected by the base figure caused by a sharp increase in revenue in commercial retail and other sectors in the first quarter of 2023. From the cost side, the company's sales expenses rate, R&D expense ratio, and management expense ratio declined year-on-year in the first quarter of 2024, and overall cost control was relatively steady.
We believe that as the company deepens marketing reforms and continues to promote refined management, its profitability is expected to increase steadily.
24Q1 Raw material procurement expenses increased. According to the company's announcement, in the first quarter of 2024, net cash flow from the company's operating activities fell 121.98% year on year, mainly due to the increase in the company's procurement expenses for raw materials such as precious materials and the increase in the commercial division's expenditure on purchasing goods. At the same time, it was noted that the company's accounts receivable were 1,696 billion yuan, an increase of 60.64% year on year, mainly due to accounts receivable generated by customer credit limit management that did not reach the payback period, and the balance of accounts receivable was generally reasonable and the risk was manageable.
Promote effective qualitative improvement and reasonable quantitative growth. According to the 2023 annual report and the official WeChat account report, in 2024, the company will adhere to the general tone of steady progress, and promote effective qualitative improvement and reasonable quantitative growth of the company economy on the basis of adhering to a good “brand, variety, and quality” work year. Through product positioning and hierarchical management, Tongrentang Co., Ltd. will do a good job of traceability; integrate marketing and further optimize services through mainstream online and offline channels; and implement multiple parallel measures to increase product awareness and sales volume.
Profit forecast and investment rating: We expect Tong Ren Tang's 2024-2026 revenue to be 198.41/221.04/24.652 billion yuan, respectively, and net profit to mother of 19.35/22.07/2,531 billion yuan respectively. The corresponding PE is 31/27/23X, respectively, maintaining the “gain” rating.
Risk factors: policy risk, market risk, raw material and quality standard risk, liquidity risk