2024Q1 Earnings improved, and profits grew rapidly under a low base
In 2023, the company's revenue was 3.499 billion yuan, +20.22% year-on-year; net profit before and after before and after deducting net profit of 0.73 billion yuan or 122 million yuan, -49.21% and -14.95% year-on-year. 2024Q1's revenue was 916 million yuan, +15.31% year over year; net profit before and after before and after deducting back and forth was 0.77 million yuan and 68 million yuan, +53.96% and +40.29% year-on-year. Due to short-term pressure from frozen baking, we lowered our 2024-2025 net profit forecast to RMB 271/342 million (previous value: RMB 315/414 million), and added our 2026 net profit forecast of 407 million yuan, corresponding EPS of 1.60/2.02/2.40 yuan for 2024-2026. The current stock price corresponds to 22.4/17.7/14.9 times PE in 2024-2026. The penetration rate of frozen baking has increased the advantage of superimposed faucets and maintained a “gain” rating.
Frozen baking and cream grew rapidly in 2023, and 2024Q1 cream continued to grow. In the short term, the revenue from frozen baking/cream/ sauce/fruit products slowed in 2023 +23.93%/+27.65%/+18.12%/-8.45%. The increase in frozen baking was mainly driven by new products in the KA channel, and the increase in cream was mainly due to new products such as whipped cream and core customer growth. Revenue from direct-run supermarket channels increased by about 50% year on year in 2023, mainly driven by new products and Sam's store expansion; distribution channels remained flat mainly due to the impact of bakery closures during the pandemic, and new channels such as restaurants and tea doubled year-on-year, and the main reason base was low. 2024Q1 frozen baking revenue remained flat year over year, with baking ingredients increasing by about 60%, mainly due to whipping cream, which doubled the growth of cream. Revenue from 2024Q1 distribution channels increased by about 25%, mainly due to new cream products, and supermarket revenue declined in single digits over the same period last year, mainly due to the high base and the impact of people returning to their hometowns during the Spring Festival.
Profitability recovery under fee control in 2024
Net profit margin in 2023 was 2.85 pct year on year, with gross margin of -0.38 pct year on year, mainly due to new product promotion to increase promotion efforts; sales, management, R&D, and financial expense ratios were +1.63, +1.05, +0.02, and +0.62 pct, respectively, and sales personnel and business promotion investment increased. The net interest rate for 2024Q1 was +2.02 pct year on year, of which gross margin was +0.56 pct year over year. Mainly due to increased capacity utilization and supply chain optimization, sales, management, R&D, and financial expense ratios were +0.20, -0.73, -0.13, and -0.03 pct, respectively. Expense ratios were steadily declining, and fee control targets were strictly enforced.
The effects of organizational changes are beginning to show. It is expected that KA supermarkets will steadily resume growth. The effects of the company's R&D and sales structural reforms will gradually be released, the growth rate of distribution cake stores will continue to improve, the company will continue to expand new products and channels. We expect that bakery stores will continue to grow and the KA supermarket will grow steadily.
Risk warning: competition increases risk, raw material rise risk, major customer dependency risk, food safety risk.