Event: The company released its 2023 Annual Report & 2024 Quarterly Report. In 2023, we achieved revenue of 7 billion yuan, -0.39% year over year, and net profit to mother of 757.6775 million yuan, +118.3% year over year. 2024Q1 achieved revenue of 1,518 billion yuan, -13.14% year-on-year, and net profit to mother of 74.12 million yuan, or -31.51% year-on-year.
The company's gross profit margin in 2023 was 7.57%, the best level in the past 4 years; the 2024Q1 gross profit margin was 12.92%, the best level for the same period in the past 5 years. The cost rate for 2023 was 5.26%, down 0.18pct year over year.
In 2023, the company sold 336,000 tons of packaging oil, -9.79% year on year, of which 195,900 tons were sold in the second half of 2023, +11.3% year over year. In the first half of 2023, the company experienced a decline in packaging oil sales due to reasons such as a slump in the overall consumption environment and reduced inventory by dealers. However, in the second half of the year, the company adopted measures such as adjusting strategies and optimizing the dealer structure, compounding the recovery in the overall domestic consumption environment, and sales rebounded significantly year-on-year.
In 2023, the number of the company's dealers was 1202, -8.66% compared with the same period. The number of dealers was affected in the short term, mainly because the company targeted traditional channels, standardized product market order, and optimized channel dealer cooperation methods.
In 2023, three products, Daodao Quandao Hemp Pepper Oil, Mianrou Hemp Pepper Oil, and Fresh Fragrant Ma Teng Pepper Oil, were successfully launched on the market at Mianyang Company. The launch of Daodaoquan seasoning oil products is a bold attempt to enrich the company's products and will help enhance the company's resilience to risks.
In order to better return shareholders, on the premise of balancing the company's future business development and production and operation capital requirements, the company proposed a profit distribution plan for the first quarter of 2024 as follows: the company plans to distribute 0.67 yuan (tax included) for every 10 shares based on the current total share capital of 343968305 shares. At the same time, the company issued the “Daodaoquan Grain and Oil Co., Ltd. Shareholder Return Plan for the Next Three Years (2024-2026)”, which indicates that under the premise of ensuring the company's continued operation and long-term development, the company's annual cash distribution profit for the next three years should not be less than 20% of the distributable profit achieved in that year.
Investment advice: Packaging oil sales are the most important variable affecting the company's performance and valuation. Under the steady operation of futures, the pressing portion can provide incremental volume. The company's increase in the dividend ratio to give back to investors not only values shareholder returns, but also reflects management's confidence in the steady growth of long-term profits. Based on the year-on-year decline in the company's sales volume in 2023, we remain cautiously optimistic about the company's future packaging oil sales growth; in addition, due to the fact that raw material prices stopped falling and rebounded, the company's gross profit for packaging oil may fall to a high level. We adjusted the profit forecast. We expect operating revenue of 74.4/81.2/8.995 billion yuan for 24-26 years (previous value of 11.375 billion yuan in 24 years); net profit to mother was 2.16/2.92 billion yuan (previous value of 690 million yuan in 24 years). The current stock price is 13.2/9.8/7.1 for 24-26 PE, respectively. Maintain a “buy” rating.
Risk warning: Packaging oil sales fell short of expectations, raw material prices rose more than expected, leading companies drastically lowered terminal product prices, and the RMB depreciated sharply. The use of public data in research reports may be delayed or not updated in a timely manner.