Incidents. The company released its 2023 annual report: In 2023, the company achieved total operating income of 3.27 billion yuan, +31.6% year on year, net profit of 530 million yuan, +54.2% year on year. Among them, the Q4 single quarter achieved total operating income of 875 million yuan, -0.8% year on year, and net profit to mother 143 million yuan, or -8.5% year on year. At the same time, the 2023 profit distribution plan was announced: a cash dividend of 3.0 yuan (tax included) will be distributed for every 10 shares, and the dividend rate will increase from 30.3% in '22 to 58.1% in '23.
The company released its 2024 quarterly report: 24Q1 achieved total operating revenue of 895 million yuan, +9.3% year-on-year, and net profit to mother of 155 million yuan, +6.7% year-on-year.
The volume and price of soy sauce revenue soared in '23, and the market layout continued to expand. By product: Soy sauce revenue +34.8% (volume +33.2%, price +1.2%). We think we may benefit from increased awareness of zero addition and channel expansion; vinegar revenue was +11.7% (volume +13.7%, price -1.7%), and other main businesses continued to grow rapidly, +39.0% to 703 million yuan over the same period last year. 24Q1 soy sauce/vinegar revenue was +9.1%/-6.2%, respectively. We believe that the slowdown in growth may be related to the higher base and increased market competition in the same period last year. By region: The central region experienced rapid growth, revenue +81.0% year over year; revenue in the East/North/South/West region was +30.9%/+27.1%/+26.0%/+23.8%; the South/Central region continued to increase rapidly in 24Q1, with revenue +43.3%/+28.4% YoY. Channel sub-channel: Direct sales/distribution channel revenue was +44.8%/+5.7% YoY in 2013, +10.4%/+3.7% YoY in 24Q1, respectively. The company continues to promote a national market layout and increase marketing network coverage. The number of dealers increased by a net of 1020/106 in 23/24Q1; in 24, it will further reduce costs and increase efficiency, strengthen marketing network construction, continuously optimize product structure and price systems, and innovate marketing channels and methods.
The product and channel structure dragged down gross profit, and sales repayment performance was good. Gross margin was +0.59pct to 37.1% year over year. We think we may benefit from the increase in the share of zero-additive products and the reduction in raw material costs (the average price of soybean/PET was -11.1%/-13.0% YoY in '23). The 24Q1 gross margin was -3.07pct year-on-year to 36.0%. We think it may be dragged down by product and channel structures. The sales repayment performance was good, with +23.2%/+14.0% year-on-year to 35.29/952 million yuan, respectively, in '23/24Q1.
Expense control was good during the period, and the profit side of Q1 was under short-term pressure. Net interest rate for the year 23 was +2.42pct to 16.5% year on year, mainly benefiting from: 1) gross margin +0.59 pct year over year, 2) the company promoted cost control and fee reduction, and the sales expenses ratio was -1.36 pct to 12.2% year over year. Among them, promotion and advertising expenses/ employee compensation expense ratios were -1.17pct/-0.44pct year on year, 3) net year-on-year increase of 0.14/0.09 billion yuan for other income. The cost ratio for the 24Q1 period was -2.14pct to 16.0% year-on-year, with sales/management/R&D/finance expenses ratios of +0.12pct/-0.91pct/-0.24pct/-1.10pct, respectively. The contraction in expenses offset the decline in gross margin, and the net profit margin for 24Q1 was -0.42pct year-on-year to 17.3%.
Profit forecasting and investment advice. We expect the company's 2024-2026 EPS to be 0.62, 0.74, and 0.87 yuan/share, respectively. Referring to comparable company valuations, we gave the company 30-35 times PE in 2024, with a corresponding reasonable value range of 18.73-21.86 yuan, maintaining a “superior to the market” rating.
Risk warning. Channels have fallen short of expectations, raw material prices have risen, industry competition has intensified, etc.