Key points of investment

Performance situation:

The 24Q1 company achieved revenue of 450 million yuan (-10.6% YoY), net profit attributable to mother of 0.3 billion yuan (YoY -10.1%), and net profit of non-attributable net income of 0.3 billion yuan (-11.0% YoY).

Revenue side: The opening of the store is progressing smoothly, and the same store is still being repaired

1) Store opening & same store: In 24Q1, the company steadily promoted the store opening plan. Continuing the 23-year strategy, it continued to cover community stores, expand high-potential stores, and develop stores in scenic spots and service areas simultaneously. Overall store expansion progressed smoothly.

2) Channel side: differentiated channel expansion strategy refers to nationalization:

——Deep vertical cultivation of the core market: Braised meat products focus on core regions such as Jiangxi and Guangdong, and penetration in prefecture-level cities is expected to accelerate through the establishment of a regional monopoly business district; rice products build a “Huangshanghuanghuang+Zhenzhenlao” integrated store model, build a unique regional brand based on the base of Jiangsu, Zhejiang, and Shanghai, and are expected to overtake cars in curves.

——The Waifu region focuses on large and medium-sized cities: The company's Waifu Market uses the big business+well-known investment agency model to expand stores, using large and medium-sized cities as breakthroughs, which is expected to accelerate the nationwide layout.

Profit side: gross profit continues to improve, waiting for profit to recover

1) Profitability: ① Gross profit margin: 24Q1 gross margin of 35.6%, +6.5 pct year on year; ② Net profit margin to mother:

The net profit margin for 24Q1 was 7.1%, the same as the previous year.

2) Cost control capability: 24Q1 The company's sales/management/R&D/financial expenses were +2.4pct/+1.7pct/+1.5pct/-0.2pct, respectively.

Profit forecasting and valuation

We expect the company's revenue growth rate in 2024-2026 to be 0.80%/10.90%/9.30%; net profit growth rate to mother will be 23.17%/17.11%/15.88%, respectively; PE is 53/45/39 times, respectively. Maintain an “Overweight” rating.

Risk warning

Demand recovery fell short of expectations, and new customer development fell short of expectations.