On April 29, 2024, Yiming Foods released its report for the first quarter of 2024.

Key points of investment

Profit-side restorative growth, lean production construction results are gradually showing

The company's total revenue for 2024Q1 was 643 million yuan (up 11% from the same period) and net profit to mother was 0.1 billion yuan (up 126% from the same period), and the profit side achieved restorative growth. 2024q1 gross margin also increased by 1pct to 30.60%. The 2024Q1 sales/management expenses ratio was 18.48%/6.75%, respectively, -1 pct/+0.3 pct year-on-year, respectively. Overall, the 2024q1 net interest rate increased by 1 pct to 1.61%. The profit side improved, and the results of lean production construction and supply chain resource management gradually became apparent.

Direct sales channels are growing rapidly, and online channels can be expected in the future

By business type, the revenue of the company's 2024Q1 franchise stores/distribution channels/direct sales channels/direct sales stores was 2.22/0.76/1.16/143 million yuan, respectively, compared with +4%/-0.1%/+47%/-0.3%, respectively. The growth rate of network channels and direct sales channels is impressive, and the major customer strategy drives the direct sales channel to continue the growth trend. Looking at the number of stores, the number of directly-managed stores/franchise stores in East China at the end of 2024Q1 was 583/1449 respectively, a net change of -35/+9 compared to the beginning of 2024. By region, the company's 2024Q1 online sales/revenue in East China was 0.23/557 million yuan respectively, up 28%/9%, respectively, and gross margin was 39%/31%, respectively. Under the trend of high gross margin online channels, the company's overall gross profit is expected to recover further.

Profit forecasting

We are optimistic about the expansion of the company's franchise stores and the improvement of single store efficiency. With the optimization of the product structure/management model, it is expected that the revenue scale and profitability will continue to increase at the same time. According to the first quarterly report, we expect the company's EPS in 2024-2026 to be 0.16/0.23/0.31 yuan/share, and the current stock price corresponding to PE is 72/50/37 times, respectively, maintaining a “buy” investment rating.

Risk warning

Macroeconomic downside risks, store development falling short of expectations, risk of rising raw material costs, and food safety risks.