Terminal demand is under pressure, wait for stores to recover, maintain the “increase” rating company to release the 2024Q1 quarterly report, achieving revenue of 460 million yuan, a year-on-year decline of 10.6%, achieving net profit due to mother of 0.33 million yuan, a year-on-year decline of 10.1%, and short-term operating pressure on the industry. We maintain profit forecasts. The company expects to achieve net profit of 1.0, 130, and 170 million yuan respectively in 2024-2026, an increase of 44.5%, 27.4%, and 32.5%. The current stock price corresponds to PE 44.9, 35.2, and 26.6 times. As a leading brand of halogen products, it is expected to benefit from increased industry concentration in the future and maintain an “gain” rating.
Same-store operations are still under pressure, and channel intensive cultivation is steady and far-reaching
The company's 2024Q1 revenue fell 10.6% year on year, mainly due to the impact of the macroeconomic environment, weak demand for terminals, a decrease in the frequency of consumer purchases, and short-term pressure on same-store operations in the halogen products business. Looking forward to the future of the halogen products business, the same store side company promotes the “1+N” business model, lays out Douyin promotion and community marketing, boosts the in-store business, and creates star items such as shredded duck, while changing the specifications and packaging to enhance product diversity. At the beginning of the year, Diandian Company formulated plans to open 2,000 new stores throughout the year. The region invigorates old markets such as Jiangxi and Guangdong and new markets around new bases such as Shaanxi and Chongqing; the store layout lays out high-potential stores such as community stores and high-speed rail airports, and also develops scenic spots and service areas, and also develops high-potential stores such as Sam and Ma New retail channels, etc. to expand omni-channel stores in multiple business formats. The second quarter gradually enters the Dragon Boat Festival, and the peak sales season for the Zhenzhenlao rice products business is approaching, which is expected to make an incremental contribution to the company's revenue growth.
The gross margin clearly recovered, and the net profit side significantly reduced losses
The company's gross margin for 2024Q1 was 35.6%, an increase of 6.5 pct over the previous year. The main reason for the significant increase in gross margin was the decline in the price of raw materials such as duck and livestock, and the lower base figure. The supply of upstream raw materials was relatively stable, and the company chose to stock up low-priced raw materials. The company's gross margin is expected to rise steadily throughout the year. The company's 2024Q1 sales expenses rate increased 2.4 pct year over year, mainly due to various promotional programs such as increasing Douyin platform fees; management expenses increased 1.7 pct year over year, mainly due to expenses such as consulting fees and employee benefits. The company achieved net profit of 32 million yuan in 2024Q1, down 10.1% year on year. Net interest rate to mother remained stable, and losses were reversed compared to 2023Q4.
Risk warning: Food safety risk, raw material price increase risk, terminal demand affecting same-store recovery risk.