The company announced 2024H1 results:
H1: Operating income of 2.927 billion (+11.9%), net profit to mother 0.308 billion (-13.8%)
The mid-term dividend was 0.28 yuan per share, corresponding to a dividend rate of 95%. There were no dividends in the middle of last year.
Revenue side volume growth drives development
24H1 achieved revenue of 2.927 billion, +11.9% YoY. Looking at the third-party business, 24H1 revenue was 1.938 billion, +12.1% year over year, and hot pot top/Chinese polymodulation were +5.6%/24.1%/14.5%, respectively. Since Q2, the off-season competition for base ingredients was fierce. Volume and price were +16/-9pct, respectively. Chinese polymodulation actively adjusted the product matrix, leading other businesses in growth. Fast food products experienced price band adjustments, and sales were +19 pct year on year, returning to the growth channel since 23H1.
Looking at the business of related parties, 24H1's revenue was 0.989 billion, +11.5% year over year, and hot pot bases/Chinese polyformulation/instant fast food were +5.7%/29.9%/167.7%, respectively. Volume growth driven development. The prices of the three products were -16/-26/ -39pct year-on-year, respectively. Profit margins are compressed due to product price adjustments.
Expense investment lowers profit margins
The gross margin of 24H1 was 29.98%, or 0.5 pct year on year. Among them, the gross margin of the underlying material business was -3.2 pct year over year, lowering the overall level. The sales expense ratio was 12.04%, +2.9 pct compared to the previous year. The company increased its investment in marketing expenses and increased transportation costs. The management fee rate was 4.79%, a year-on-year decrease of -0.6pct. Overall, 24H1 net profit margin was -3.2pct to 10.52% year-on-year.
Investment advice
Our point of view:
The B-side product matrix was gradually improved, and the market area gradually expanded. Overseas expansion is expected to accelerate, and it is expected to contribute to the increase. The Hebei Bazhou project (0.028 million tons of convenient fast food) was put into operation in 24Q1, and the Anhui butter base (0.057 million tons) was put into operation in 24Q2, and the supply chain was further improved. Revenue is expected to grow by double digits in 2024, while the 24H2 cost-efficiency ratio is expected to increase.
Profit forecast: Combined with 24H1 performance, we adjusted the profit forecast. In 2024-2026, the company is expected to achieve total operating income of 6.884/7.616/8.373 billion yuan (previous value: 68.67/7.614/8.39 billion yuan), +12%/+11%/+10% (previous value: +12%/+11%/+10%); achieve net profit of 0.857/0.99/1.124 billion yuan (previous value: 0.975/1.095/ 1.218 billion yuan), 1%/16%/13% year over year (previous value: +14%/+12%/+11%). The current stock price corresponds to 2024-2026 PE 10 times 12/11/10 times, respectively, maintaining the “buy” rating.
Risk warning
Macroeconomic downside risks, increased industry competition, regional expansion falls short of expectations, new product releases fall short of expectations, catering industry expansion falls short of expectations, food safety incidents.