Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved revenue of 1,901 million yuan, +27.69% year on year; net profit to mother of 134 million yuan, +31.43% year on year; of these, 2023Q4 achieved revenue of 573 million yuan, +25.02% year on year; net profit to mother of 40 million yuan, +26.50% year on year.
2024Q1 achieved revenue of 463 million yuan, +8.04% year over year; net profit to mother of 35 million yuan, +14.16% year over year; deducted non-net profit of 34 million yuan, +14.05% year over year. In 2023, the company plans to distribute 0.19 yuan per share (tax included), and plans to repurchase no less than 60 million yuan and no more than 100 million yuan of shares.
Big B's recovery was high in 2023, and the external impact of 2024Q1 put a slight strain on performance. In 2023, driven by high recovery growth in Big B, annual revenue increased 27.7% year-on-year, and came to a successful conclusion.
By product, in 2023, the company achieved revenue of 8.7/3.6/3.7/30 billion yuan, compared to +24.2%/+29.2%/+26.4%/+38.6%. Among them, cooking products achieved high growth, mainly contributed by the continued release of steamed and fried dumplings and the acceleration of the development of prepared dishes; the slow growth of deep-fried products was mainly due to the slowdown in the growth of fritters among core customers and limited room for growth of sesame balls. By channel, the company's Big B channel increased 49.9% year on year, and the number of major customers increased 27.9% year on year to 197. The top three customers accounted for 31.7% of the company's overall revenue, and annual sales increased 68.5%/59.5%/43.1% year on year, respectively. The Little B channel was constrained by slow overall recovery. The annual revenue increased 15.7% year over year. Among them, the revenue of the top 20% of core dealers increased 18.4% year on year, and the number of newly developed channel distributors in 2023 increased by 33.8% year on year to 1,541. In 2024, Q1 company's revenue increased 8.0% year on year. The growth rate is expected to slow down mainly due to a slight decline in Big B's revenue. Last year, Big B's restorative growth had a high base impact. Coupled with a slight decline in the upstream and downstream dining scene, Big B core customers have strong demand for cost reduction in the supply chain. The growth of the small B channel is strong. In the Q1 quick-frozen noodle and rice products industry, competition for the small to medium B channel is intensifying. When the company does not participate in promotional competition, Little B still achieved faster than overall revenue growth.
The product structure continues to be optimized, and the profit level is rising steadily. In 2023, the company's gross margin was +0.3 pct year-on-year to 23.7%, mainly due to the increase in the share of high-margin bakery products, and product structure optimization driven a steady increase in gross margin. In terms of expenses, the company's sales/management/R&D expenses rates in 2023 were 4.7%/8.4%/1.1%, respectively, +0.8/-0.9/+0.1pct, respectively. The overall cost ratio remained stable. In addition, in addition to the increase in government subsidies, the annual net interest rate was +0.2pct to 7.0% year over year. The gross margin of the 2024Q1 company was +1.5pct to 25.5% year on year, and the sales/management/R&D expenses ratio was 5.9%/8.4%/1.1%, respectively, +0.8/+0.5/+0.2pct, respectively. Promotion competition in the Q1 industry intensified. After the Spring Festival, the company gradually increased its market cost investment, and the sales expense ratio increased slightly. Q1 The overall profit level remained stable, with a net margin of +0.5pct to 7.4% year over year.
Short-term demand is under pressure, and active adjustments are being made to accumulate energy for long-term development. Looking ahead to 2024, Big B customers are resilient in their operations, but facing the overall trend of cost-effective consumer demand, Big B customers often choose to achieve growth by exchanging price for volume, putting higher demands on upstream supplier costs. The company considers long-term development to maintain overall price stability. It is expected that it will continue to accelerate the promotion of large customers and increase the development of regional chain customers to gain more growth. The B-side is expected to achieve steady growth throughout the year under a high base. Small B-side companies will adjust their sales strategies to respond positively to market competition. It is expected to drive overall growth, driven by the strength of large single products and the continuous introduction of new products. On the profit side, considering weak demand for food and beverage and intensifying market competition, cost investment is expected to increase, but the decline in raw material prices and product structure optimization will still offset some of the costs.
Profit forecast: We expect to achieve revenue of 22.0/25.8/3.01 billion yuan in 2024-2026, up 15.8%/17.4%/16.4% year-on-year, and achieve net profit of 1.6/1.9/230 million yuan, +19.7%/20.9%/19.6% year-on-year, corresponding to PE22/18/15X. We gave 28 times PE based on our 2024 results, with a target price of 45.25 yuan per year, maintaining a “buy” rating.
Risk warning: food safety risks; increased industry competition; risk of rising raw material costs; new customer development falls short of expectations; new product launches fall short of expectations.