occurrences

Tianwei Foods released its 2024 mid-year report. 2024H1 achieved revenue of 1.468 billion yuan, 2.95% YoY; net profit to mother of 0.247 billion yuan, or 18.79% YoY. 2024Q2 achieved revenue of 0.614 billion yuan, -6.80% YoY; net profit to mother was 0.071 billion yuan, or -10.90% YoY.

Chinese polymodulation is highly resilient, and online channels have achieved high growth

(1) By product, 2024Q2 hot pot seasoning achieved revenue of 0.198 billion yuan, a year-on-year ratio of -22.94%, accounting for -6.76pct of revenue to 32.17%, or mainly due to the company's strategic adjustments and a slight increase in competition for hot pot base in the southwest. Driven by food-derived foods, 2024Q2 achieved revenue of 0.392 billion yuan for Chinese cuisine seasoning, or +4.75% year-on-year, accounting for +7.01pct to 63.88% of revenue. (2) By channel, 2024Q2 online channels and offline channels achieved revenue of 0.122/0.492 billion yuan respectively, or 57.37%/-9.58% year-on-year. (3) In terms of dealers, the number of dealers was +12/+20/-16/-35/+4 in East/South/West/North/Central during the reporting period, and the number of dealers decreased by a net of 15, focusing on channel quality.

Product structure optimization, cost dividend release

The proportion of Chinese polymodulation with optimized product structure and higher gross margin increased; combined cost dividends were further released, and 2024Q2's gross margin increased 2.20 pct year over year to 33.33%. 2024Q2 sales expense rate/management expense rate/R&D expense ratio -0.72/-1.39/+0.61pct to 10.70%/6.85%/2.01% year over year, gross sales margin further increased by 2.92 pct to 22.63%, and overall net margin +0.3 pct to 12.41% year over year.

Food extracts have sufficient growth potential, and cost dividends continue to be released. Maintaining the “purchase” rating, we adjusted the company's 2024-2026 operating income to 3.354/3.712/4.09 billion yuan, respectively, +6.53%/+10.67%/+10.18% year-on-year; net profit to mother was 0.527/0.599/0.679 billion yuan, respectively, with year-on-year growth rates of 15.41%/13.62%/13.36%, EPS respectively 0.49/0.56/0.64 yuan. Considering that foodstuffs have sufficient growth potential, the combined cost dividend continues to be released, which is expected to increase the company's profits and maintain the “buy” rating.

Risk warning: macroeconomics falling short of expectations, rising raw material costs, food safety issues