Incident: 1) The company issued a pre-profit announcement for the 2024 semi-annual results. 2024H1 achieved revenue of 2.62 billion yuan, a slight decrease over the previous year; realized net profit to mother of 0.315-0.378 billion yuan, an increase of 1.758-1.821 billion yuan, to turn a loss into a profit; realized net profit after deduction of 0.306-0.368 billion yuan, an increase of 0.01-0.072 billion yuan over the previous year, an increase of 3.37%-24.30% year on year. 2) The company issued an announcement regarding the increase in the company's shares by some directors and executives. Yu Xiangyang, general manager of the company, and Lin Ying, director, executive deputy general manager and head of finance of the company, recently increased their holdings by a total of 0.0512 million shares, for a total increase of 0.9978 million yuan.
The consumer environment was compounded by the impact of the painful period of reform, and 24Q2 performance was under pressure.
1) The 24Q2 company's revenue is expected to be 1.135 billion yuan, down 11.8% year on year. On the one hand, the company's condiment business revenue declined slightly year-on-year due to the slowdown in macroeconomic recovery and the intensification of competition in the industry; on the other hand, the company's channel reforms continued in the second quarter, and it was in a period of business run-in and performance pain.
2) After deducting non-net interest rates in 24Q2, the year-on-year decline was about 3 pcts. It is estimated that this is mainly due to the impact of channel costs, advertising expenses, etc. during the reform period, while the scale effect weakens due to the decline in revenue.
The three-year plan strategy is clear, and the increase in executive holdings also shows confidence in the company's reform and future development. The company released Delicious Fresh's strategic plan for the next three years. The goal is to create a new kitchen state and achieve high quality development. 2024 is the beginning of a three-year strategic period and a year of momentum. The company emphasizes continuing to focus on the condiment industry, strictly guided by strategy, firmly implementing various business initiatives, and progressing in an orderly manner in channel efficiency, product development, and lean supply chain management. The current performance is under pressure without altering its long-term potential. In addition, the company's general manager and executive vice president increased their shareholding, which also showed confidence in the company's reform and future development.
Investment advice: With the clarification of the three-year strategic plan of Delicious Fresh and the implementation of equity incentives, the company is expected to contribute significant revenue growth in terms of market development and channel decline. Taking advantage of channel advantages, the product portfolio will continue to improve, and profitability is also expected to increase steadily. The company's net profit for 2024-2026 is estimated to be 0.73, 0.92, and 1.11 billion yuan, respectively, and EPS is 0.93, 1.17, and 1.41 yuan respectively, corresponding to 24-26 valuations of 21, 16, and 14 times, respectively, maintaining a “buy” rating.
Risk warning: Industry competition intensifies, demand recovery falls short of expectations, raw material prices fluctuate, channel expansion falls short of expectations, reform progress falls short of expectations, food safety issues.