occurrences
On July 9, 2024, Zhongju Hi-Tech announced the 2024 semi-annual results forecast.
Key points of investment
Industry demand was weak, and both revenue and profit declined in Q2
2024H1 expects revenue of 2.62 billion yuan, a decrease of 1%. Net profit due to mother is 0.315-0.378 billion yuan, -1.443 billion yuan for the same period in 2023, and 0.306-0.368 billion yuan after deducting net profit from non-mother is 0.306-0.368 billion yuan, an increase of 3% to 24%. Among them, the 2024Q2 company's revenue is expected to be 1.135 billion yuan, down 12%. The sales pace of the main condiment business is slowing down. Net profit to mother is 0.076-0.139 billion yuan, and -1.593 billion yuan for the same period in 2023. Net profit after deducting non-return to mother is estimated to be 0.069-0.131 billion yuan, a decrease of 54%-14%. The company's performance in the second quarter was affected by the slowdown in macroeconomic recovery and the intensification of industry competition, etc., and the overall performance was under pressure.
Contrary reforms have gone through a painful period, focusing on channel strategy optimization
The company's revenue and profit performance in the second quarter fell short of expectations. On the revenue side, in 2024, the company established the B-side region to boost the catering business, but demand in the catering market has been weak since 2024Q2, and there have been significant environmental disruptions in the short term. At the same time, the company officially initiated business strategy adjustments in the second quarter, shifting the cost investment policy from channel-driven to consumer-driven, and reorganizing channel chain resources, while internal benefit distribution adjustments brought resistance to reform, and it is currently in a painful period of reform. On the profit side, the company adjusts procurement policies to reduce temporary procurement, improve planned procurement, give full play to bargaining power, cooperate with logistics optimization, and continue to optimize costs, while the company's upfront cost investment offsets profit growth brought about by cost savings. Subsequently, on the one hand, the company will improve the quality of customer service, gradually adjust the team structure/channel management model to suit the current stage of development, and lay out new customers while consolidating high-quality customers, which is expected to contribute to revenue growth; on the other hand, the company continues to upgrade high-end and healthy products, promote product structure optimization, and build an upward channel in the stock market. Under the 2024H2 low base, with the recovery of external demand and the release of internal reforms, the company is steadily moving towards the goal of equity incentives.
Profit forecasting
Since the restructuring of the company's board of directors, the marketing structure and personnel adjustments have been completed. The manufacturer relationship needs to be further straightened out after the channel reform. As the reform deepens, the company's channels continue to move towards healthy development after the painful period. As external demand recovers and the pace of reform is optimized, the company's operating pace will steadily improve. EPS is expected to be 1.11/1.37/1.69 yuan in 2024-2026, and the current stock price is 18/14/12 times PE, respectively, maintaining a “buy” investment rating.
Risk warning
Downward macroeconomic risks, increased competition in the industry, the recovery of restaurants falling short of expectations, rising raw material prices, and risks of reforms falling short of expectations.