Description of the event

In the first quarter of 2024, the company achieved operating income of 1,012 billion yuan, an increase of 10.04% year on year; realized net profit of 70.7816 million yuan to mother, an increase of 2.22% year on year.

Incident comments

The company's business performance in the first quarter was divided. The company's mooncake series products and frozen products achieved revenue of 9.029 million yuan/295 million yuan respectively, down 20.09%/4.10% year-on-year from last year's high base; other food manufacturing products and food service businesses achieved revenue of 299/384 million yuan, an increase of 27.56%/13.33% year-on-year, reflecting the high boom brought about by the peak season of the Spring Festival. In addition, the total catering revenue of enterprises above the limit increased 9.20% year-on-year in the first quarter. The company's revenue growth was higher than the industry average. Food manufacturing and sales channels remained stable. The direct sales model, distribution and consignment sales model respectively achieved revenue of 193/411 million yuan, an increase of 8.95%/9.01% year on year, and the distribution and consignment sales model contributed 68%, which remained unchanged year on year.

The market competition is fierce, and the ability to control costs has improved. On the one hand, the trend of increased competition in the catering industry continued into 2024 in the second half of 2023. On the other hand, the revenue share of mooncake series high-margin products declined relatively. The company's gross margin and net margin in the first quarter were under pressure, respectively 29.81%/7.96%, down 2.58/0.61 pct year on year; the company's cost side control was good, with a year-on-year decrease of 19.34%, down 2.25 pct year on year, reaching the lowest level in the first quarter of the year. Looking at the breakdown, the company's sales expenses rate/management expense ratio/financial expense ratio/R&D expenses ratio were 9.80%/ 8.43%/-0.70%/1.81%, -0.35/ -0.7/-1.27/+0.08pct, respectively.

The deepening of the market layout outside the province has shown results, and distributors and agents are continuously adjusted and optimized. Looking at the subregion, Guangdong Province achieved revenue of 454/137 million yuan in the first quarter, up 6.62%/13.69% year on year, and overseas revenue of 12.24 million yuan, up 70.54% year on year. This was mainly due to external factors affecting the lower overseas revenue base for the same period last year. 67 new distributors and agents were added in the first quarter, including 1 overseas and 109 closed. These were all domestic distributors and agents, a net decrease of 42, to a total of 1,030 at the end of the period. In the future, the company will continue to build a flexible and multi-channel system. On the basis of maintaining traditional channels, the company will step up efforts to develop new channels and promote performance growth.

Investment advice and profit forecast: I am optimistic that the company will adhere to the corporate strategy of “strong catering brand, food create scale”, and make every effort to build a “big restaurant, big food, big brand” industry pattern. On the catering side, actively expand new stores, occupy new markets, go to the whole country, enhance brand awareness, food, product innovation, channel expansion, diversified marketing, etc., and move towards the long-term goal of “creating a famous brand with a hundred years of experience and building a first-class international food group”. It is estimated that in 2024-2026, the company's net profit will be 647/75/849 million yuan, respectively. The PE corresponding to the current stock price is 16X/14X/12X, respectively, maintaining a “buy” rating.

Risk warning

1. Consumption recovery is slow;

2. Increased channel competition;

3. Newly opened restaurants have a long climbing period;

4. Increase in the price of raw materials.