occurrences

On August 28, 2024, Ajichika released the 2024 semi-annual report.

Key points of investment

Weak external demand, phased pressure on performance

The company's 2024H1 revenue of 0.327 billion yuan (same decrease of 22%), net profit due to mother of 0.042 billion yuan (same decrease of 43%), net profit of non-return to mother of 0.041 billion yuan (same decrease of 43%), including 2024Q2 revenue of 0.161 billion yuan (same decrease of 25%), net profit due to mother 0.023 billion yuan (same decrease of 40%), net profit of non-return to mother of 0.023 billion yuan (same decrease of 40%), overall market demand is weak Sales of soft and prepared dishes are slowing down. On the profit side, 2024Q2's gross margin decreased by 1 pct to 24.70%, and the sales/management expenses ratio increased by 0.01pct/3pct to 4.27%/6.50%, respectively. The increase in management expenses was mainly due to an increase in shared expenses for the commissioning of the new plant. Taken together, the net margin also decreased by 4 pct to 14.51%, putting pressure on profitability performance.

Sales of prepared dishes are slowing down, and the release of production capacity is being promoted rationally

By product, the company's revenue for meat and poultry/fisheries/other products in 2024Q2 was 0.112/0.042/0.006 billion yuan, a decrease of 24%/27%/25%, respectively. Among meat and poultry products, the revenue of 2024Q2 beef/poultry/pork/lamb products was 0.67/0.03/0.013/0.001 billion yuan, respectively, a decrease of 27%/14%/4%/77%, respectively. Among aquatic products, the revenue of 2024Q2 fish/shrimp products was 0.023/0.019 billion yuan respectively, down 30%/23% respectively. Affected by market demand, the phased sales performance of various prepared dishes was under pressure. The company subsequently increased its reserves of new products and reasonably promoted the release of new production capacity to provide a guarantee for improving product supply/stability. In terms of regions, the company's 2024H1 revenue in East China/Central China/North China/Southwest/Northeast China was 3.06/0.02/0.0001/0.006/0.0001 billion yuan, respectively, -21%/-28%/-35%/-64%/+8%/+8%, respectively. The Southwest and Northeast markets expanded steadily.

Single store operations are under pressure, and support policies are clearly increased

The company's 2024Q2 retail/supermarket/wholesale/direct sales and other/e-commerce customer channel revenue was 1.07/0.045/0.0004 billion yuan, respectively, a decrease of 23%/8%/26%/95%/27%, respectively. In the retail channel, the revenue of 2024Q2 franchisees/dealerships was 0.085/0.022 billion yuan, respectively, a decrease of 25%/14%. As of the end of 2024H1, the company's franchise/dealer/supermarket customers/wholesale customers They were 1778/746/94/559, respectively, with a net change of -45/18/11/24 at the beginning of the year. Single store revenue declined, and the pace of franchisee development slowed down. The company then clarified store opening support policies, provided store assistance, boosted store owners' business confidence, and further improved channel layout.

Profit forecasting

Currently, the overall consumption environment is weak, and store operations are clearly under pressure. We are optimistic about the company's solid development, sort out channel strategies in a timely manner, and promote store opening support policies. At the same time, the company has sufficient production capacity reserves, and can undertake incremental development after external demand recovers. According to the semi-annual report, we expect EPS to be 0.80/0.84/0.86 yuan in 2024-2026, and the current stock price corresponding to PE is 23/22/21 times, respectively, maintaining a “buy” investment rating.

Risk warning

Macroeconomic downside risks, production capacity progress falling short of expectations, increased market competition, and the risk of rising raw materials.