occurrences

In the first half of 2024, the company achieved total revenue/operating revenue/net profit attributable to mothers/net profit after deducting non-net profit of 8.92/0.892/0.059/0.059 billion yuan, compared with the same period last year

4.87%/4.87%/6.14%/11.29% Single Q2 achieved total revenue/operating revenue/net profit attributable to mothers/net profit after deducting non-net profit of 4.29/0.429/0.025/0.025 billion yuan, 1.65%/-3.36%/7.77% year-on-year.

Core points

Big B is growing steadily, and the performance of dishes and cooking products is good. By channel, 24H1 direct/distribution channel achieved revenue of 0.412/0.476 billion yuan respectively, an increase of 8.54%/1.77% year-on-year. Competition in the catering market is still fierce, but the overall performance of the company's Big B channel is steady, leading customer growth is weak, and the number of active mid-tier brands and cooperative customers continues to increase year-on-year. Demand on the small B-side was weaker than expected and achieved small single-digit growth, mainly because dealers stocked a large amount of goods before the Spring Festival, but market demand failed to meet expectations after the Spring Festival, which led to slow inventory consumption. By product, 24H1 frying category/ baking/ cooking/ cooking category/ cooking category and others each achieved revenue of 3.74/0.17/0.211/0.133 billion yuan, -4.26%/-8.34%/+32.4%/+18.99%.

The decline in the deep-frying category was due to little room for increase in the market share of core products and increased competition in the industry. The baking category did not perform well due to the decline in the share of big B, but cooking and cooking achieved double-digit growth. The company increased customer stickiness and helped improve the business through the development of pre-prepared dish products. The company will continue to maintain market competitiveness through innovation and quality improvement for large single products such as fritters and steamed fried dumplings.

Currently, the market price war is intense, the company's net interest rate is basically stable, and it is within a reasonable profit range. In the first half of 2024, the company's gross margin/net profit margin was 25.21%/6.65%, compared to 1.97/0.08pct, respectively; the sales/management/ R&D/financial expense ratios were 5.52%/9.37%/1.17%/-0.16%, respectively, 0.66/1.06/0.24/-0.41pct, respectively.

In 24Q2, the company's gross margin/net profit margin was 24.95%/5.77%, 2.43/-0.3pct, respectively; the sales/management/R&D/finance expense ratios were 5.13%/10.47%/1.28%/-0.18%, respectively, 0.48/1.65/0.24/-0.45pct, respectively. Since government subsidy expenses were confirmed at about 3.4 million in the same period last year, and subsidies were reduced this year, net interest rate for 24Q2 still increased compared to 23Q2 after excluding this part of the impact.

Based on the current competitive market environment, the company's business strategy has been adjusted. It is expected that the revenue side will accelerate in the second half of the year and the net interest rate will remain within a reasonable range. In the second half of the year, the company plans to focus on expanding fast food and hot pot customers on the B-side, including brands such as pizza, fried chicken, and Sichuan-style hot pot, to enhance market coverage. Small B-side dealers faced inventory pressure in Q2, and purchasing activity weakened. After May, the purchasing pace returned to normal. The company plans to strengthen support for leading dealers while increasing sales staff to serve intermediary channel providers. Under pressure on revenue, the company increases gross profit margin through upstream raw material price negotiations and intelligent transformation, while improving internal management efficiency and optimizing transportation and storage costs, investing profits spillover after front-end improvements into channels, and keeping profits within a reasonable range while guaranteeing revenue growth.

Profit Forecasts and Investment Ratings

We adjusted our profit forecast for the next three years. Revenue for 2024-2026 is 2.059/2.426/2.792 billion yuan, respectively (the original forecast was 2.219/2.685/3.18 billion yuan), an increase of 8.3%/17.83%/15.09% year-on-year. Net profit for 2024-2026 is expected to be 0.145/0.172/0.2 billion yuan, respectively (the original forecast was 0.162/0.199/0.238 billion yuan), up 7.89%/19.02%/16.12% year on year. EPS for the next three years will be 1.46/1.74/2.02 yuan respectively, corresponding to the current share price PE being 16/13/12 times, respectively, maintaining a “buy” rating.

Risk warning:

Food safety risks; increased risk of market competition; risk of fluctuations in raw material prices.