Key points of investment

The company released its 2024 three-quarter report: 2024Q1-3 achieved operating income of 2.36 billion yuan, +5.8% year over year; realized net profit attributable to mother 0.43 billion yuan, +35% year over year; realized net profit deducted from mother 0.389 billion yuan, +38% year over year. The 24Q3 company achieved operating income of 0.897 billion yuan, +10.9% year over year; realized net profit of 0.186 billion yuan, +65% year over year; realized net profit deducted from mother 0.179 billion yuan, +73% year over year. Revenue was in line with expectations, and profit surpassed expectations.

The medium and winter adjustments grew rapidly, and the hot pot base was corrected year on year. The year-on-year revenue growth rates of 2024Q3's Hot Pot Seasoning/Chinese Seasoning/Winter Seasoning/Other Businesses were +1.1%/+19.7%/-3%, respectively.

The year-on-year change in revenue for 2024Q3 hot pot ingredients is expected to be mainly due to strong channel replenishment after the peak season, and demand is driven by the launch of new thick hot pot products; the accelerated growth of Chinese seasoning 24Q3 is expected mainly due to the company accelerating SKU iterative expansion, while the growth rate of online small B leading food extracts is faster; the rapid growth rate of winter adjustment is expected to be strong, and the company seizes the market with early delivery this year.

The online performance was outstanding, and channel reform was deepened. The year-on-year growth rate of 2024Q3's online/offline revenue was +55%/+6%, respectively. Online channel revenue is expected to continue to increase due to the company's strengthening of online products and channel layout. The company uses online channels as a platform to promote new products, and actively embraces interested e-commerce in addition to traditional e-commerce. The year-on-year revenue growth rate of the 2024Q3 company in East/South/West/North/Central was +9%/+17%/-6%/+15%, respectively. By the end of 24Q3, the number of company dealers was 3129, a decrease of 21 compared to 24Q2, mainly due to the company deepening its business support channel policy and continuously optimizing the dealer team.

The fee structure was adjusted and fee control was strengthened, and the fee ratio improved significantly to drive up the net interest rate. 2024Q3's gross margin was +0.76pct year-on-year, mainly due to product structure optimization+continuation of cost dividends, and the proportion of high-margin mid-range and winter-adjusted products increased in 24Q3. The 2024Q3 company's sales/management/R&D/finance expense ratios were -7.8/-0.7/+0.2/+0.3 pct, respectively. The significant decrease in sales expense ratios was mainly due to the fact that some of the company's expenses were offset against revenue in the form of discounts, and market expenses and advertising expenses were reduced year-on-year due to adjustments in fee settlement methods. Overall, in 2024Q3, the company's net interest rate to mother was +6.8pct year-on-year, increasing profitability.

Channel inventory is healthy, and 24Q4 growth momentum is sufficient. Channel exchanges and feedback. Currently, the company's channel inventory is good for 2 months. With the arrival of the peak season, terminal demand is picking up, compounded by strong demand for early Spring Festival preparations, we expect the 24Q4 company's revenue side to accelerate growth; the easing of the industry price war during the peak season is expected to push the company to continue to optimize cost rates, and there is plenty of momentum for performance growth.

Profit forecast and investment rating: 24Q3 performance exceeded expectations. We raised our 24-26 revenue forecast to 3.42/3.77/4.19 billion yuan (previously 3.34/3.68/4.09 billion yuan), +9%/+10%/+11% year over year, and raised net profit forecast to mother to 0.59/0.66/0.75 billion yuan (previously estimated at 0.532/0.602/0.679 billion yuan), +30%/+12% /+ 13%, corresponding PE is 25/22/20x, respectively, maintaining a “buy” rating.

Risk warning: raw material prices fluctuate greatly, industry competition pattern deteriorates, channel construction falls short of expectations, consumption power recovery falls short of expectations, mergers and acquisitions fall short of expectations