occurrences

The company announced its 2024 three-quarter report. With 24Q1-3, the company achieved total revenue of 7.169 billion yuan, +56.46% year over year, net profit due to mother 0.341 billion yuan, +101.15% YoY, net profit not attributable to mother 0.267 billion yuan, +211.55% YoY. In 24Q3, the company achieved total revenue of 2.095 billion yuan, +24.03% YoY, net profit to mother 0.052 billion yuan, +221.89% YoY, net profit not attributable to mother 0.038 billion yuan, +210.13% YoY.

Invest and build a base, incubate sub-brands, and plan mergers and acquisitions to achieve expansion

1) The reforms have been effective, and revenue continues to grow. Since 2023, the company has firmly implemented the “high-end cost performance” strategy and promoted optimization and transformation in business segments such as online and offline distribution and new stores. Since 23Q3, the company has achieved positive revenue growth for five consecutive quarters, and the year-on-year revenue growth rate in a single quarter has remained above 20%.

2) Increase supply chain construction. The company plans to invest no more than 0.2 billion yuan to build the East China Snack Industrial Park and supply chain intensive bases in the North and Southwest regions to achieve rapid product matching and supply chain cost reduction and efficiency based on changes in market demand.

3) Incubate sub-brands and contribute new growth points. The company plans to invest no more than 0.1 billion yuan to help incubate new sub-brands such as Big Names, Coach Dragonfly, Oriental Yan Qiusheng, and Coco Guo, focusing on convenient fast food, healthy and light food, nourishing food, chocolate, etc.

4) Increase the offline physical business format and enter the milk beverage circuit through mergers and acquisitions. The company plans to reach in-depth cooperation with iSnack, iDiscount, and Health Foods through a total investment of no more than RMB 0.36 billion through its subsidiaries, and use the three squirrels to jointly expand the offline market and enter a new dairy drink circuit.

Supply chain optimization enhances gross profit margin, and integrates product and sales to optimize management efficiency 1) Increased gross margin and optimized management cost ratio led to an increase in profitability in the first three quarters. 24Q1-3, the company's net margin/gross margin was 4.76%/25.44%, respectively, +1.06/+0.70pct. The gross margin optimization was mainly due to cost optimization brought about by the self-built supply chain for nut categories; the total cost rate for the period was -1.52pct, and the sales/management/R&D/finance expense ratios were 18.05%/2.11%/0.25%/0.09%, respectively, +0.06/-1.45/-0.16/+0.03pct. The management cost ratio optimization was mainly due to the company's management efficiency after implementing “integration of quality and marketing” An increase; in addition, investment income/other income accounted for 0.48%/0.65% of total revenue, respectively, -0.37/-1.05pct.

2) Gross profit margin and net profit margin continued to rise in the third quarter. In 24Q3, the company's net margin/gross margin was 2.46%/24.46%, +1.51/+0.11pct; the total cost ratio for the period was -0.70pct, and the sales/management/R&D/finance expense ratios were 19.08%/2.52%/0.28%/0.07%, respectively, -0.21/-0.44/-0.08/+0.03pct.

Investment advice

We expect the company's net profit to be 0.401/0.574/0.768 billion yuan in 24/25/26, respectively, with a growth rate of 82.63%/43.02%/33.75%, corresponding to PE 27/19/14 times on October 29 (market value 10.9 billion yuan), maintaining the “gain” rating.

Risk warning

Food safety risks, increased risk of online competition, and risk of offline channel expansion falling short of expectations.