Description of the event
In 2023, Qianhe Flavors achieved total operating income of 3.207 billion yuan (+31.62%); net profit to mother of 530 million yuan (+54.22% year over year), after deducting non-net profit of 530 million yuan (+56.66% year over year). The company's total revenue for 2023Q4 was 875 million yuan (-0.82% YoY); net profit to mother was 143 million yuan (-8.47% YoY), after deducting non-net profit of 144 million yuan (-7.76% YoY). The company's total revenue for 2024Q1 was 895 million yuan (+9.28% YoY); net profit to mother was 155 million yuan (+6.66% YoY), after deducting non-net profit of 152 million yuan (+4.69% YoY).
Incident comments
Growth remained resilient under a high base, and new products and channels continued to break through. By category, look at 2023 and 2024Q1 revenue, soy sauce of 2,040 million yuan (YoY +34.85%), 2024Q1 (YoY +9.13%); table vinegar 422 million yuan (YoY +11.75%), 2024Q1 (-6.22% YoY); 703 million yuan (YoY +39.04%), 2024Q1 (YoY +18.78%). By sales model, looking at 2023 and 2024Q1, the distribution model was 2,344 million yuan (YoY +44.75%), 2024Q1 (+10.40% YoY); direct sales model was 822 million yuan (+5.70% YoY), 2024Q1 (+3.70% YoY); and online sales amounted to 631 million yuan, with a slight year-on-year increase. By the end of 2024Q1, the number of the company's dealers reached 3,356 (up 38% year-on-year and 3.3% month-on-month), and the expansion of new distribution channels has driven the company's core revenue growth. Online sales remained flat in 2023, mainly due to the high base for the same period in 2022/Q4, which may have led to a decline in the company's direct sales share; in addition, the slowdown in direct sales also put relative pressure on the operation of direct-run supermarkets. The related subsidiary Sichuan Jiheng achieved revenue of 165 million yuan in 2023, a year-on-year decrease of 15.9%, and a loss in net profit.
The average price of soy sauce remains stable, and cost-side improvements are expected to be realized quarterly. The company's net profit margin for 2023 increased 2.42 pct year on year to 16.54%, gross margin +0.59 pct year on year to 37.15% year on year, and the period expense ratio -0.95 pct year on year to 17.94% year on year, with detailed changes: sales expenses ratio (-1.36 pct year over year) and management expenses ratio (+0.87 pct year over year). The company's 2024q1 net interest rate fell 0.42 pct year on year to 17.32%, gross margin -3.07 pct year on year to 35.96%, and the period expense ratio -2.14 pct year on year to 15.99% year on year, with detailed changes: sales expense ratio (+0.12 pct year over year) and management expense ratio (-0.91 pct year over year). In 2023, the company's gross margin increased steadily and slightly. The average price of soy sauce increased by 1.2% year on year, and the average cost rose slightly by 0.54% year on year. It is expected that with the advent of cost-side improvements (cost changes lag behind due to more than 180 days of fermentation cycles for the company's core products), quarterly gross margin is expected to improve sequentially, and gross margin for the whole year is expected to increase slightly.
As a brand that is deeply tied to a healthy positioning, the company follows the trend of healthy upgrading of condiments. The market segment is more popular than the industry as a whole, and the company has a perfect incentive mechanism, strong team execution, and there is still plenty of room for growth in national penetration, which is expected to increase its share and position in the industry. The company's revenue and profit are expected to continue to grow rapidly in 2024. The company is expected to achieve net profit of 703/868 million yuan in 2024/2025, corresponding to EPS of 0.68/0.84 yuan in 2024/2025, and about 24/19 times the 2024/2025 PE valuation, respectively, and maintaining a “buy” rating.
Risk warning
1. Risk of slow recovery in demand; 2. Industry competition further exacerbates risks; 3. Risk of changes in consumer consumption habits; 4. Risk that prices of some raw materials will continue to rise, etc.