Core views

The company accelerated the promotion and cultivation of new ready-to-drink products, cultivated a second growth curve, and promoted “second entrepreneurship”, and vigorously promoted team and channel construction around the two core products of Meco juice tea and Lanfangyuan frozen lemon tea. Fruit juice tea resumed growth in the first year. Frozen lemon tea was officially launched in the first year, achieving pre-tax sales revenue exceeding 0.2 billion yuan, and the market potential was fully verified. Looking at the brewing business throughout the year, the brewing business is growing steadily as the external market environment improves; sales of ready-to-drink products are expected to accelerate, bringing new business growth to the company. As the number of retail outlets increases, the company's ready-to-drink business is expected to grow further.

occurrences

The company released its 2024 mid-year report

Xiang Piaopiao released its 2024 mid-year report. In the first half of the year, the company achieved revenue of 1.179 billion yuan, +0.8%; net profit loss to mother of 0.03 billion yuan, loss of 0.044 billion yuan in the same period last year; net profit loss not attributable to mother was 0.043 billion yuan, and a loss of 0.08 billion yuan for the same period last year.

In the second quarter of a year, the company achieved total operating income of 0.454 billion yuan, -7.5%; net profit loss to mother of 0.055 billion yuan, loss of 0.05 billion yuan in the same period last year; net profit loss of 0.063 billion yuan after deducting non-return to mother, and 0.073 billion yuan in the same period last year.

Brief review

Brewing and ready-to-drink two-wheel drive to reorganize product development strategies

By business, the company achieved revenue of 0.614 billion yuan in the 24H1 brewing category, -2.13% year on year, and 0.547 billion yuan in ready-to-drink revenue, +3.83% year over year. In terms of products, the company uses breakout and ready-to-drink two-wheel drive as a development strategy. It has also replanned key series of ready-to-drink products, and actively promoted sales and summed up experience in the model market. In terms of sales, the original brewing team was optimized and adjusted to an “all-category team” to give full play to synergy; the ready-to-drink sales team adopted a “focus” strategy to further focus on cities with greater sales opportunities for ready-to-drink products.

By channel, the company achieved revenue of 10.16/0.094/0.01/0.04 billion yuan in 24H1 dealer/e-commerce business/export/direct management respectively, a year-on-year increase.

2.91%/-25.07%/15.31%/26.40% By the end of 2023, the company had 1,775 dealers, a net increase of 244 during the reporting period. Along with the development of the ready-to-drink business, the company recruited a series of full-time ready-to-drink dealers.

Increased gross margin and reduced sales rates

The company continues to benefit from the reduction in procurement costs of raw materials such as fat grafting powder and packaging materials and the company's price increase. 2024H1 gross margin was 30.58%, +2.69pct year on year, of which Q2 gross margin was 25.71%, +2.13pct year on year. The 24H1 sales/management/R&D/finance rate was 28.47%/9.28%/1.59%/-3.66%, -2.74/+0.16/+0.27/ -0.61 pct. Among them, the decrease in sales rate was mainly due to a decrease in marketing expenses and advertising investment, and the slight increase in management expenses was mainly due to an increase in equity incentive costs. Thanks to an increase in gross margin and a decrease in sales rates, 24H1 achieved a reduction in net profit and loss.

Ready-to-drink products are constantly being refined, and new products are still being cultivated

Meco, such as fresh fruit tea products, will use “differentiation” as the core of development. The “cup” form brings convenience and a sense of style to drink and store. The company has repositioned the product as a “second choice outside of tea shops,” and the “cup shape” is distinguished from the bottled form of other competitors, enabling the company to stand out from the fierce competition in convenience stores. Lanfangyuan frozen lemon tea is currently in the “0-1” development stage. Combining the effects of the product to relieve heat, thirst, and fatigue, and the characteristics of products that do not contain carbonic acid, the company highlights its “cool” characteristics through advertisements, etc., and has accumulated and developed steadily in sample markets in Beijing and Guangdong.

Profit forecast: Brewed products are in peak season in the second half of the year, and profit is expected to be good, but considering the external consumption environment and industry competition, we lowered our profit forecast. We expect the company to achieve revenue of 3.8, 4.122, and 4.504 billion yuan in 2024-2026, and achieve net profit of 0.315, 0.388, and 0.452 billion yuan.

Risk warning: 1) Risk of rising raw material prices: if the price of raw materials for packaging materials and grafting materials rises above expectations; 2) Increased industry competition: there are many brands in the beverage industry, and industry giants have strong channels and the ability to replicate competitors. If competition within the industry intensifies, it will adversely affect the company's operations; 3) New product performance falls short of expectations: the company's new products require a lot of expenses in the early stages. If the market performance of the company's new products falls short of expectations, it will have an impact on the company's subsequent growth on the performance side; 4) Changes in consumer preferences: the company's classic products are brewing Milk tea has a long history, but the tastes of young consumers have varied. If consumer preferences change dramatically, it will have a major impact on the company's business.