The precooked food business grew steadily, and B-side customer development continued to advance, maintaining a “gain” rating of 4.91 billion yuan in revenue in 2023, -4.0% year on year, net profit to mother -540 million yuan, new year-on-year loss; 2024 Q1 revenue of 1.04 billion yuan, -26.3% year on year, net profit of 0.4 billion yuan, -66.3% year on year. The company's revenue was in line with expectations and profit fell below expectations. Considering the impact of US companies' losses and inventory impairment, we lowered our 2024-2025 profit forecast and added the 2026 profit forecast. The net profit for 2024-2026 is 0.4 (-0.7), 0.9 (-1.1), and 140 million yuan, respectively, with EPS of 0.03 (-0.06) yuan, 0.08 (-0.10) yuan, and 0.12 yuan, respectively. The PE corresponding to the current stock price is 98.5, 40.6, and 25.7 times, respectively. The company is based on the aquatic food business and continues to promote the development of the prepared food business and the development of large B-side customers, and maintains an “increase” rating.
The main fishery food business will maintain steady development. In the future, the main fishery food business will focus on building large products to achieve revenue of 4.61 billion yuan, -4.0% year-on-year, of which pre-prepared dishes revenue was 1.16 billion yuan, +2.3% year over year. The company achieved steady growth in prepared dishes by boosting large items such as crayfish, grilled fish, pickled fish, bullfrog, etc.; in 2023, revenue from other aquatic food products was 3.45 billion yuan, -6.6% year-on-year, mainly due to poor fishery consumer market sentiment and the continuous decline in sales prices of the company's main products. 2024Q1's revenue was -26.3% year-on-year, mainly due to the fact that consumption recovery in the fishery industry fell short of expectations. Looking forward to 2024, the company will continue to promote the development of the prepared aquatic food business, focus on building core products, continue to consolidate the competitive advantage of the industry, and expand its market share. There is still plenty of room for future development in the prepared aquatic food business.
The domestic market is growing steadily, and B-side customer development is progressing well
Domestic and foreign market revenue in 2023 were +12.7%/-19.5%, respectively. The domestic market is growing at a good rate. On the one hand, the company continues to enhance its competitive advantage on the catering side and continues to develop Chinese and Western catering customers; on the other hand, it has established good cooperative relationships with large domestic supermarket customers, continuously expands the space for cooperation, and increases the sales volume of the company's major customers.
The sharp decline in foreign revenue is mainly related to the high pressure on overseas sales. In November 2023, the company and Hema Xiansheng reached a strategic cooperation order with annual sales of 500 million yuan, which is expected to directly increase performance in 2024.
Overseas business and inventory impairment are dragging down profitability. The prepared food business is expected to increase the gross profit level in 2023 by -6.02pct to 6.71% year-on-year, mainly due to the decline in sales prices of aquatic products; 2024q1 gross margin was +5.89pct to 16.23% year over year, mainly due to the increase in the share of deep-processed and prepared food products. The company's expense ratios did not fluctuate much in 2023 and 2024Q1, but due to US subsidiary losses and inventory impairment, net interest rates for 2023 and 2024Q1 were -10.80pct to -11.02% and -0.73pct to -0.17%, respectively. In the future, as the fishery industry recovers and the share of ready-made food revenue increases, there is still room for improvement in the company's overall profitability.
Risk warning: macroeconomic downside risk, increased risk of market competition, risk of rising costs.