Incidents:
The company announced 2023 revenue/net profit to mother of 34.99/0.73 billion yuan, up 20.22%/-49.21% year on year; corresponding to 2023Q4 revenue of 917 million yuan, up 6.67% year on year, and net profit to mother of -85 million yuan. 2024Q1 revenue/net profit/deducted net profit to mother was $916./0.77/68 million yuan, up 15.31%/53.96%/40.29% year over year. After excluding share payments corresponding to equity incentives, net profit attributable to shareholders of listed companies was 81 million yuan, an increase of 22.3% over the same period last year. The results fell slightly short of expectations.
Revenue side: Increased contribution from cream products and catering channels
In '23, the company's revenue from frozen baked semi-finished products/baking raw materials increased by 24%/13% year on year; distribution channels/supermarkets/restaurants, tea and new retail revenue accounted for 55%/30%/15%, and revenue remained flat/+50%/+100% year over year. The 24Q1 company's revenue increased 15.31% year-on-year, and there were positive growth points in products and channels. (1) In terms of products, frozen baking will continue to promote the upgrading of old products throughout the year; second, new product development will improve quality and reduce volume; new cream production lines are also expected to be put into operation as early as mid-year; therefore, the slow and high pace is expected to continue to contribute to product-side growth momentum in the second half of the year. (2) Looking at channels, the distribution channel is expected to maintain high growth throughout the year with the launch of new cream products and the commissioning of new production lines. Supermarket channel revenue is expected to achieve high single-digit growth for the whole year. Catering and new retail channels are optimistic about the progress of major customer cooperation and corresponding investment gains in this channel throughout the year, and are expected to grow rapidly.
Profit side: Product structure and procurement mechanism increase gross profit margin
The 24Q1 gross profit margin was 32.59%, +0.56pct year over year. The main reasons for the increase are (1) structural changes brought about by the high increase in cream; (2) the procurement authority for major raw materials refers to the headquarters, improving the ability to judge, inquire, and bargain in bulk prices; and (3) the increase in capacity utilization. The sales and R&D expense rates were 12.1%/3.55% respectively, +0.21pct/-0.13pct compared to the previous year. The overall control is stable. You may refer to this level throughout the year 24. The management fee rate was 6.6%, down 0.7 pct from the previous year, but the absolute amount of management expenses is more rigid than others, and it is expected that the annual rate will be further reduced.
Profit Forecasts, Valuations, and Ratings
Based on expected positive changes in pig price trends, we expect the company's 2024-2026 revenue to be 41.23/48.65/5.745 billion yuan, up 17.84%/17.99%/18.09% year on year; net profit to mother (not considering the impact of the new round of incentive expenses) of 2.91/3.54 billion yuan, up 297.81%/21.71%/20.04% year on year, and a 3-year CAGR of 79.79%. Referring to comparable company valuations, we gave the company 26 times PE in 2024, with a target price of 44.70 yuan, maintaining a “buy” rating.
Risk warning: Competition in the industry intensifies, new product promotion falls short of expectations, and costs fluctuate greatly