Incident: Mycorando announced its 2024 quarterly report. In 24Q1, the company achieved revenue of 950 million yuan, -7.14%; realized net profit of 41.3 million yuan, +70.63% year-on-year; realized net profit of 30.89 million yuan without deduction to mother, +426.34% year-on-year.

Comment:

Q1 Revenue declined slightly, and cheese's performance was relatively stable. By product, Q1 liquid milk, cheese and dairy products trade revenue was 81.06 million yuan, 785 million yuan, and 82.34 million yuan, respectively, or -0.38%, -3.28%, and -35.80% compared with the same period last year. We believe the slow recovery in demand in the dairy market is still affecting the company's revenue.

There was a slight improvement in gross margin, and lower fees control and minority shareholders' profit and loss boosted profits. On the profit side, Q1 company's gross margin increased slightly, +0.40pct year over year. On the cost side, the company's sales expense ratio declined markedly, -1.85pct year over year. Combined with the decline in minority shareholders' profits and losses due to the company's cash acquisition of the remaining shares in Jilin Technology last year, net profit returned to mother increased dramatically in Q1.

Profit forecasting and investment ratings: Fee control is effective in reducing costs, and demand is expected to recover. In a situation where consumption recovery is weak, the company actively reduced costs and increased efficiency, and controlled expenses, with obvious results. On the one hand, the current price of Australian cheese ingredients still has a year-on-year advantage; on the other hand, the company is actively launching new products, strengthening channel expansion, and striving to open up revenue space. We expect the company's 2024-2026 EPS to be 0.26/0.38/0.52 yuan, corresponding to the 2024-2026 53X, 37X, and 26X PE respectively, maintaining the company's “buy” rating.

Risk factors: food safety issues, increased competition in the industry