occurrences
The company released its 2023 annual report, showing that it achieved operating income/net profit attributable to mothers/ net profit after deducting non-net profit of 1,848/3.29/292 million yuan in 2023, 27.36%/107.87%/96.97% compared with the same period last year. The company achieved operating revenue/net profit attributable to mothers/net profit after deducting non-net profit of $534/115/104 million yuan in a single 23Q4, or 10.85%/67.08%/45.39% year-on-year. The profit growth rate is close to the previously forecast upper limit.
At the same time, the company released a report for the first quarter of 2024, showing that Q1 achieved operating income/ net profit attributable to mother/ net profit of 5.86/0.91/84 billion yuan, compared with 49.75%/65.3%/68.54% year-on-year, in line with previous expectations.
Key points of investment
In 2023, while promoting organizational structure optimization, the company also optimized its product and customer structure. Innovative channels all achieved rapid growth, rich product matrices, and continuous expansion of categories. By channel, distribution/e-commerce and other sales models achieved revenue of 1,572/2.16/489 million yuan respectively, compared with +27.63%/29.39%/9.86%. Among them, emerging channels contributed significantly, and the growth performance of mass sales of snacks, e-commerce, and major customers was impressive. By product, comprehensive nuts and beans, green peas, melon seeds, broad beans, etc., achieved revenue of 4.29/3.97/2.36/1.95/315 million yuan, respectively, compared with the same period last year
+38.75%/+21.64%/+15.03%/6.63%/51.41%. The product idea has created a multi-category growth curve. The main core categories continue to expand, and the results of cultivating new products are beginning to show. As of the end of 2023, the number of dealers was 3,158 (including 2,385 official dealers and 773 trial dealers), adding 235.
Costs have dropped significantly in '23, and net interest rates have increased substantially. In 2023, the company's gross margin/net profit margin was 36.24%/17.81%, 1.98/6.9pct, respectively. The increase in gross margin was mainly due to a decrease in raw material costs. In terms of cost ratios, sales/management/R&D/finance expenses were 11.5%/3.78%/1.26%/-0.83%, respectively, -2.55/-0.72/-0.3/-0.04pct. In 23Q4, the company's gross margin/net profit margin was 36.04%/21.53%, 1.14/7.25pct, respectively; the sales/management/ R&D/finance expense ratios were 11.09%/3.2%/1.22%/-0.76%, respectively, -1.94/0.36/1.82/-0.3pct, respectively. The cost rate declined significantly due to the scale effect. At the same time, due to the certification of high-tech enterprises at the end of the year, the income tax rate dropped sharply from 23Q4, driving up net interest rates.
Revenue had a good start in the first quarter of '24, and profits continued to rise. In Q1 2024, we achieved operating revenue/net profit/net profit after deducting non-net profit of 586/0.91/084 million yuan, or 49.75%/65.3%/68.54% year-on-year. During the peak consumption season during the Spring Festival, New Year's products such as melon seeds, peanuts, macadamia nuts, and walnuts performed well, and the scale increased to a certain extent compared to the same period.
The company's gross margin/ net profit margin for the first quarter was 35.39%/15.58%, respectively -0.95/1.48pct year on year. Strong e-commerce channel promotions led to a decline in gross margin during the Spring Festival, but net interest rate maintained a good year-on-year increase. The 24Q1 sales/management/R&D/finance expense rates were 13.1%/3.49%/1.06%/-0.57%, respectively, -0.57/-0.83/-0.08/0.07pct.
In '24, the company will focus on product innovation, optimizing supply chain efficiency, improving organizational management capabilities, and comprehensively strengthening itself from the three perspectives of channels, products, and operations. From a channel perspective:
Major customers will continue to focus on high-end member stores and customized services with Big B, and cooperate deeply with Sam and Costco; e-commerce channels are expected to have a lot of room for growth this year after personnel adjustments have been completed and in line with existing product breakthroughs (no longer limited to the old three); mass sales channels have basically achieved mainstream brand coverage. This year, as the market itself expands and opens stores and increases the number of SKUs entering the market, it can achieve rapid growth; traditional channels have improved markedly after 23 years of strategic adjustments, and will continue to focus on high-efficiency counters to drive Ping Ping's efficiency to continue improving this year. The product will further strengthen and upgrade the old three products, and at the same time develop soybeans, peanuts, and potato chips, and increase the coverage of empty outlets through the joint efforts of the four major categories. From an operational perspective, establish a talent pool, strengthen cost control, and continuously improve logistics, warehousing, distribution and cost control capabilities. The price of palm oil was locked ahead of schedule in Q1. In the future, cost fluctuations will still be calmed down through hoarding and price locking, and profit margins are expected to continue to improve in 24 years.
Profit Forecasts and Investment Ratings
We expect revenue for 2024-2026 to be $24.63/31.30/$3.70 billion, respectively, and +33.29%/27.09%/18.22% YoY. Net profit to mother for 2024-2026 is $411/5.29/637 million yuan, respectively, or +24.81%/28.81%/20.37% YoY. The corresponding EPS for the next three years was 4.41, 5.68, and 6.83 yuan, respectively, and the corresponding PE was 19/15/12 times, respectively. It covered for the first time, giving it a “buy” rating.
Risk warning:
Food safety risks; increased risk of market competition; risk of fluctuations in raw material prices.