Core views

The company's announcement revealed H1 revenue. The condiment business revenue decreased slightly compared to the same period last year. Overall consumer sentiment is relatively low this year, and the food and beverage channel is recovering relatively slowly, putting some pressure on condiment sales. At the same time, overall competition in the industry has also intensified this year. The company has been carrying out reform work since management was put in place last year. Q2 also focused on channel adjustments. It is expected that the reform potential will be released in the second half of the year. Q2 is also in the run-in stage after channel reform, which also has an impact on sales. At present, the company's channels have been adjusted, and sales expenses support has been strengthened in line with the channel strategy. Combined with a relatively low base for the second half of the year, it is expected to achieve a month-on-month improvement.

occurrences

The company disclosed the 2024 mid-year performance forecast:

It is estimated that in 2024, H1 will achieve net profit of about 0.315-0.378 billion yuan; increase 1.758 billion yuan to 1.821 billion yuan over the previous year, turning a loss into a profit; and H1 net profit of about 0.306-0.368 billion yuan after deducting non-return to mother in 2024, an increase of 10 million yuan to 72 million yuan over the previous year.

In the Q2 single quarter, net profit due to mother is expected to be 0.076-0.139 billion yuan, and net profit after deduction of 0.069-0.131 billion yuan, a year-on-year decrease of 54.35% to 13.55%.

Brief review

Demand performance is weak, and internal channel adjustments within the company affect sales

The company's announcement revealed the H1 revenue situation. It is expected to achieve revenue of about 2.62 billion yuan, a slight decrease compared to the same period last year; the condiment business revenue also decreased slightly compared to the same period last year. Overall consumer sentiment is relatively low this year, and the food and beverage channel is recovering relatively slowly, putting some pressure on condiment sales. At the same time, overall competition in the industry has also intensified this year.

The company has been carrying out reform work since management was put in place last year. Q2 also focused on channel adjustments. It is expected that the reform potential will be released in the second half of the year. Q2 is also in the run-in stage after channel reform, which also has an impact on sales. At present, the company's channels have been adjusted, and sales expenses support has been strengthened in line with the channel strategy. Combined with a relatively low base for the second half of the year, it is expected to achieve a month-on-month improvement.

Real estate is gradually being divested, and government savings are expected to be implemented within the year

The company is also promoting the divestment of the real estate business this year. The Huoju District Expropriation Center expropriated a total of about 52.9744 acres of state-owned commercial and residential land located in Zhongshan Station and the surrounding area, with an estimated compensation of about 0.296 billion yuan. In addition, a total of 168.89 acres of intersticed land and safety protection land outside the red line of expropriation due to the Shenjiang Railway expropriation within the company were also verified with the relevant government to determine the expropriation compensation plan, which is scheduled to be determined by October 31, 2024. The divestment of the real estate business is expected to quickly return cash to the company and lay the foundation for supporting the development of the main condiment business.

Reform dividends need to be released. Focus on channel expansion and promotion of new effects

The company's reforms continued to advance this year, not only introducing an equity incentive plan, but also vigorously carrying out channel changes, including the company promoting the implementation of hierarchical dealer management, introducing target responsibility assessment mechanisms to improve terminal coverage and customer service capabilities; investing resources in favor of cultivating end consumers, driving transformation from channels to consumers, and setting up a special team to connect with weak catering channels to cultivate a direct management system. In terms of products, the company has reorganized the category structure, clung to the development of major categories such as soy sauce and chicken extract powder, and focused on creating large single products based on product quality advantages; at the same time, it also launched healthy concept products such as organic and salt reduction to meet the needs of differentiated scenarios. On the supply chain side, the company is reforming the procurement model, strengthening the informatization transformation of the entire business process, implementing cost reduction and efficiency, and improving operating efficiency. Within H1, the company also successfully held a dealer conference, and channel adjustments were basically completed. It is hoped that the results of subsequent reforms will gradually be shown to help the company achieve high-quality growth.

Profit forecast: In line with the performance forecast, we lowered our previous profit forecast. We expect the company to achieve revenue of 5.768, 6.798, and 8.064 billion yuan in 2024-2026, and achieve net profit of 0.713, 0.927, and 1.218 billion yuan, corresponding EPS of 0.91, 1.18, and 1.56 yuan/share.

Risk warning: 1) Risk of rising prices of raw materials such as soybeans: Direct materials account for a relatively high share of production costs in the condiment industry. Prices of bulk agricultural products such as soybeans have fluctuated greatly in recent years, which has had a great impact on the company's profits. If the subsequent rise in raw material prices exceeds expectations, it will have an adverse impact on the company's performance.

2) Food safety risks: Condiments are frequently used in production and life, and are widely used. They are directly related to people's dietary health. If a related food safety incident occurs, it will reduce the public's trust in the company's products and have a major adverse impact on the company's business operations. 3) Demand recovery falls short of expected risk:

The company's current operating pace is still constrained by the recovery process of downstream demand. If terminal demand falls short of expectations, the company's operating performance will still face some pressure in the short term.