The company's Q3 revenue/net profit to mother were +10.9%/+64.8%, respectively. Revenue picked up, and profits were impressive. Q3 Company's base business has improved, and the Chinese polyblend (including food extract) and winter blending businesses have achieved high growth. The profit-side expense strategy changed and efficient investment led to an increase in gross sales margin and achieved significant growth. Currently, major products in the industry are still dominated by handmade butter base, sauerkraut fish seasoning, crayfish ingredients, etc. Overall sales have slowed down, and channel competition is also relatively intense. We believe that the company's revenue side has single product advantage+multi-channel development potential. The future growth center may slow down, but the increase in production efficiency and the high cost efficiency ratio brought about by channel reforms are expected to release higher profit elasticity. It is recommended to focus on profit flexibility+benefits brought by high dividends, and the layout can be increased at the bottom. We gave 24-25 EPS of 0.58 and 0.66 yuan respectively, corresponding to a 24-year valuation of 24X, maintaining the “Highly Recommended” rating.

Q3 revenue/net profit to mother were +10.9%/+64.8%, respectively. Tianwei Foods announced its 2024 three-quarter report. The company achieved revenue of 2.364 billion yuan in the first three quarters, +5.8% year over year, net profit to mother 0.432 billion yuan, +35.0% year on year, and deducted non-net profit of 0.389 billion yuan, or +38.1% year over year. Among them, Q3 alone achieved revenue of 0.897 billion yuan, +10.9%, net profit to mother of 0.186 billion yuan, +64.8% year-on-year, and deducted non-net profit of 0.179 billion yuan, or +73.4% year-on-year. The company's Q3 revenue picked up, and profits exceeded expectations.

The Q3 company's cash payback was 1 billion, -7.2% year over year, slower than revenue growth. Contract debt was 0.1 billion yuan, an increase of 26.09 million over Q2, and -27.3% year over year. Net operating cash flow was 0.302 billion, -14.4% YoY.

The base material improved month-on-month, and the growth of Chinese seasoning continued to be high. 1) By business, 24Q3's base material business revenue was +1.1% year-on-year, with a significant improvement over Q2, mainly due to peak season sales improvements and the company's increased promotion of new products; Chinese compound revenue was +18.1%, continuing the high growth trend in the first half of the year, mainly due to a recovery in sales and food extract contributions; sausages and bacon seasoning +19.7%, active channel preparation, and -3.0% year-on-year ratio for other businesses. 2) By channel, offline channel Q3 revenue was +6.0% year over year, and online e-commerce channels increased 55.4% year over year. The impressive growth rate was mainly due to companies increasing e-commerce investment. 3) Looking at the subregions, the main business regions in Q3 were +8.9%/+17.1%/12.8%/15.0% year over year; the northern region was -15.0% year over year. During the reporting period, the number of company dealers was 3129, a decrease of 21 over the previous month.

Costs have declined, gross margin has increased steadily, and the cost ratio of efficient investment has increased dramatically. Q3 The company's gross profit margin was 38.8%, +0.8 pcts year over year, mainly driven by lower costs and structural improvements brought about by the faster winter-adjusted growth rate of high-margin products. The company changed its marketing strategy and increased channel full promotion, which had a certain hedging effect on the overall gross margin. The sales expense ratio was 7.8%, a sharp drop of 7.8 pcts year on year. The main reason was that the company changed its marketing strategy. Q3 dealers directly carried out full sales promotions, not due to cost investment. More efficient use of expenses increased the company's gross sales margin by 8.5 pcts year on year. The company's operating expenses ratio was 5.2%, -0.7 pct year on year, and the net interest rate was 21.4%. Driven by the expansion of gross sales margin, +9.1 pcts year over year, the profitability improved significantly.

Full-year outlook: The revenue side catches up with the annual target and expects new base products to lead growth. On the revenue side, the company's revenue increased by 5.8% in the first three quarters, and the target growth rate of the annual employee stock ownership plan was 10%. In Q4, as the peak season gradually arrived, the company optimized channel management, accelerated sales improvements, and continued to catch up with revenue side targets. On the profit side, the cost price of fats and oils has been falling steadily this year. The company continues to enjoy cost dividends and an increase in gross margin brought about by improved production efficiency. At the same time, the company's focus on reducing costs and increasing efficiency has shrunk, and profitability is expected to improve markedly throughout the year. In addition, Tianwei Foods has also implemented digital and standardized applications to improve management efficiency. These plans show that Tianwei Foods is committed to achieving the company's continuous growth and market competitiveness through various measures.

Investment advice: marketing improves revenue recovery, is cost-effective and profitable, and maintains a “highly recommended” rating. The company's Q3 revenue/net profit to mother were +10.9%/+64.8%, respectively. Revenue picked up, and profits were impressive. Q3 The company's base material business improved, and the Chinese polyblend (including food extract) and winter blending business achieved high growth. The profit-side expense strategy changed and efficient investment led to an increase in gross sales margin and achieved significant growth.

Currently, major products in the industry are still dominated by handmade butter base, sauerkraut fish seasoning, crayfish ingredients, etc. Overall sales have slowed down, and channel competition is also relatively intense. We believe that the company's revenue side has single product advantage+multi-channel development potential. The future growth center may slow down, but the increase in production efficiency and the high cost efficiency ratio brought about by channel reforms are expected to release higher profit elasticity. It is recommended to focus on profit flexibility+benefits brought by high dividends, and the layout can be increased at the bottom.

We gave 24-25 EPS of 0.58 and 0.66 yuan respectively, corresponding to a 24-year valuation of 24X, maintaining the “Highly Recommended” rating.

Risk warning: demand recovery falls short of expectations, costs have risen sharply, competition has deteriorated again