Incident: The company issued an announcement that due to the construction needs of the Huoju Development Zone project in the Zhongshan section of the Shenjiang Railway, it was necessary to expropriate a total of about 52.97 acres of state-owned commercial and residential land between the company and Zhonghui in the Zhongshan Station and surrounding area and provide compensation, adding 296 million yuan to the company's revenue.
Land expropriation is progressing, and we look forward to the subsequent divestment process. Previously, the company and its subsidiary Zhonghui Hechuang owned about 1,600 acres of undeveloped land on the north side of Zhongshan Metro Station. According to the announcement, the expropriation involved a total of 53 acres of land within the red line (296 million yuan compensation has been confirmed, unit price 8,295 yuan/㎡) +169 acres of affected seam land and safety protection land outside the line (in principle, compensation is calculated according to the method within the red line, totaling 935 million yuan, but it still needs to be confirmed after coordination and verification with relevant government and railway departments, and pricing is expected to be completed by the end of October).
If all land is landed, it can contribute 1.23 billion in compensation, and the remaining 1,378 acres will need to be divested. Based on the current unit price, the total valuation of 1,600 acres is 8.848 billion yuan. The compensation confirmed this time is included in other business income and is not included in the scope of the equity incentive target assessment.
The reform process is progressing steadily, and the incentive plan shows confidence. The company promotes reforms in various areas such as channel management, product focus, and supply chain efficiency. Channel side: more detailed assessment of dealers, hierarchical dealer management, etc.; product side: focus on resources to create major national products. The results of the reforms are beginning to show. The 24Q1 revenue side was +8.64% year-on-year, and the revenue from delicious fresh food was +10.20%. Profitability improved significantly, with a net interest rate of 16.10%, +5.15 pct year on year, and a net interest rate of 16.7% to the mother of delicious fresh returns, +5.18 pct year on year. Incentives: The company launched a restricted stock incentive plan, covering 7 executives including the chairman and general manager, as well as 248 middle management and core business executives. The number of shares awarded was 12.234,400, at a price of 13.79 yuan/share. The corresponding assessment targets cover operating income, operating profit margin, and return on net assets. Among them:
The revenue target is an increase of 12%/18%/48% in 24-26 (corresponding revenue/operating profit to reach 10/1.8 billion for 26 years).
Profit forecast: We believe that 24 was the first year of the company's reform, and various reform initiatives progressed steadily, and there is strong certainty that goals will be achieved. The company's product structure was optimized (reducing edible oil production, increasing the proportion of high-margin products: soy sauce & chicken essence), and at the same time launched health products such as organic salt reduction to supplement the high-end product matrix.
On the cost side, starting in Q2, the company will optimize the production & procurement side, add dividends on the raw materials side, and the gross margin is expected to increase further. Under careful assumptions, we only consider the 296 million compensation confirmed this time. The company is expected to achieve revenue of 60.98/67.65/8.072 billion yuan in 24-26, up 18.66%/10.94%/19.31% year-on-year respectively, and achieve net profit of 10.16/9.60/1,243 billion yuan, respectively, up -40.10%/-5.56%/29.46% year-on-year respectively. The corresponding PE is 17.70/18.74/14.48x, maintaining the “recommended” rating.
Risk warning: macroeconomic downside risk, industry demand falling short of expectations, rising costs exceeding expectations