Incident: Recently, the company released its 2024 quarterly report. 2024Q1 achieved operating income of 2,316 billion yuan, up 3.91% year on year; realized net profit of 889 million yuan, up 19.96% year on year; realized net profit after deduction of 706 million yuan, an increase of 15.43% year on year.
The northern market grew faster, and direct sales channels contributed more. Looking at the subregions, 2024Q1 companies' revenue in East China/Central China/Southwest China/South China was compared year-on-year
-2.84%/-4.43%/-5.50%/+7.30%, with North China/Northwest/Northeast China growing rapidly, with North China/Northwest/Northeast China +23.01%/+20.47%/+69.59%, respectively; by channel, 2024Q1 distribution/direct sales channel revenue was 2.123 billion yuan/183 million yuan, respectively, +0.61%/+55.94% year-on-year, respectively.
Gross margin was slightly increased, costs were optimized, and benefits from changes in fair value were added to increase profit margins. 24Q1's gross margin was 47.17%, +0.23pct year on year; sales expense rate/management expense rate/ R&D expense ratio were 7.26%/0.95%/0.33%/-0.84%, respectively, with year-on-year changes of -1.23pct/-0.05pct/-0.02pct/-0.24pct, with significant cost optimization; combined fair value change revenue increased by 51 million yuan to 155 million yuan year-on-year, and finally achieved a net profit margin of 37.95%, +5.08pct year on year.
Continuing to enrich the product matrix and actively expand incremental channels; maintaining a high dividend rate in '23, while repurchasing shares reduced registered capital, which is conducive to increasing shareholder returns. In 2024, the company will continue to enrich the six walnut product matrices according to market demand to achieve product structure upgrades; strengthen existing channels, actively expand incremental channels, and continuously increase market share; implement bC integrated promotion and C-side operation to upgrade the “global deep distribution+full chain C-end operation” marketing model. In terms of shareholder returns, the company has maintained a high dividend rate for the past three years, with a cash dividend ratio of 137.85% in 2023, which is conducive to stabilizing shareholders' return expectations; at the end of '23, the company passed a share repurchase plan bill, and the number of shares repurchased will be cancelled in accordance with the law and the registered capital of the company will be reduced.
Investment advice: The company is a leader in the walnut milk industry, with high brand awareness and perfect channel layout. Through product segmentation and intensive market cultivation, walnut milk is expected to maintain a steady growth rate. At the same time, the company continues to explore vegetable protein drink tracks and proxy functional drinks to broaden category boundaries. Furthermore, through share repurchases and a more stable dividend policy, the company shows confidence in long-term development, and is an excellent target for steady growth and high dividends. We expect the company's 2024-2026 EPS to be 1.35, 1.52, and 1.74 yuan respectively. The current stock price is 20, 18, and 16 times PE in 2024-2026, respectively, maintaining an “incremental” rating.
Risk warning: Industry competition intensifies, consumer demand recovery falls short of expectations, promotion of new products falls short of expectations, fluctuating raw material prices, food safety issues.