Incident: The company released its 2023 report and 2024 quarterly report. In 2023, it achieved revenue of 14.05 billion yuan, a year-on-year increase of 15.3%, and a net profit of 1.48 billion yuan, a year-on-year increase of 34.2%; of these, 23Q4 achieved revenue of 3.77 billion yuan, -6.3% year over year, and realized net profit of 360 million yuan, or -13.4% year on year; at the same time, the company plans to distribute 1.775 yuan (tax included) of cash dividends per share to all shareholders, with a dividend rate of 53.2%. 24Q1 achieved revenue of 3.75 billion yuan, +17.7% year over year; realized net profit of 4.4 billion yuan, +21.2% year over year; the company's performance was in line with market expectations.
Q1 The main hot pot ingredients business is growing rapidly, and channel development is progressing steadily. By category, in 2023, the company achieved revenue of 44.1/39.3/26.3/2.54 billion yuan respectively, +11.8%/+29.8%/+10.2%/+5.4% compared with the previous year; the maintenance of high growth in dish products was mainly due to the combination of new liuwu and the volume of Chef Yasui. The revenue growth rate of 24Q1's surimi products/cooking products/meat products/rice and noodle products was +31.5%/+12.3%/+27.7%/+4.4%, respectively. The hot pot business benefited from the promotion of products such as lock in fresh packaging and maintained rapid growth, and the growth rate of rice and noodle products was pressured by disturbances in the external environment. By channel, 24Q1 company's dealer/supermarket/new retail/e-commerce channel revenue was +22.6%/+0%/-8.3%/+35.6% year-on-year, respectively. Traditional distribution channels continued to grow rapidly, and the growth rate of supermarkets and new retail channels declined year-on-year due to changes in consumption scenarios. The company actively promoted channel development and decline. As of 24Q1, the number of the company's dealers increased net by 29 to 1993.
Structural upgrades + declining costs, and profitability continues to improve. The company's gross margin in 2023 was 23.2%, +1.3pp, of which 23Q4 gross margin was +2.6pp to 26.3% yoy; 24Q1 gross margin was +1.8pp to 26.6% yoy. The increase in gross margin in 24Q1 is mainly due to 1) the increase in the share of high-margin products such as frozen packaging led to structural upgrading, 2) the continuous decline in raw material costs compounded by a decline in surimi procurement prices. In terms of cost ratio, 24Q1 company's sales expense ratio was +0.1pp to 7.5% year over year; management expense ratio was +0.3pp to 3.1% year over year, and the overall cost investment was relatively stable. Taken together, thanks to declining costs and structural upgrades, the company's 2023/24Q1 net interest rate increased by 1.5pp/0.1pp to 10.7%/11.7% year-on-year, respectively
Products and channels are improving, and the company's operating potential is improving. 1) In terms of products, the company adheres to the product strategy of “promoting staple foods and launching main dishes”, and adheres to the “high quality, medium and high price” pricing strategy; in 24, it plans to build a super hot product cluster and regional exploits in the “Lock Fresh 5.0 + Shrimp Skate Series”, while actively cultivating roasting channel products such as volcanic stone sausages and including them in annual promotion priorities, using the company's excellent ability to build large products to continuously improve the overall product structure. 2) In terms of channels, the company uses a “full-channel effort” channel strategy. On the one hand, the company actively promotes channel sinking and expansion to the low-tier market, and on the other hand, deeply explores channel potential and fully embraces Big B (Tescom customers) + new retail channels; new and old markets work together with online and offline to continuously increase market share. Looking forward to the future, the company's operating potential will continue to improve, and it is expected to achieve a sharp rise in quantitative profit in the medium to long term.
Profit forecasting and investment advice. EPS is expected to be 5.86 yuan, 6.83 yuan, and 7.86 yuan respectively in 2024-2026, and the corresponding dynamic PE will be 14 times, 12 times, and 11 times, respectively, giving a “holding” rating.
Risk warning: Risk of rising raw material costs, risk of market development falling short of expectations.