On October 30, 2024, Xiang Piaopiao released the 2024 three-quarter report.

Key points of investment

Revenue is slightly under pressure, and profit performance is steady

Revenue performance is under pressure, and overall profits are steady. 2024Q1-Q3's total revenue was 1.938 billion yuan (down 2.05%), net profit attributable to mother was 0.018 billion yuan (+408.98%), after deducting non-net profit of -0.006 billion yuan (-0.04 billion yuan for the same period last year). 2024Q3's total revenue was 0.759 billion yuan (6.10% decrease), net profit attributable to mother was 0.047 billion yuan (same decrease of 0.62%), after deducting non-net profit of 0.037 billion yuan (same decrease of 6.52%). Cost improvements combined with reduced manufacturing costs, and gross margin performance is superior.

2024Q1-3 gross margin/net margin was 34.64%/0.90%, respectively, +2.40/+0.74pcts, respectively; 2024Q3 was 40.94%/6.22%, respectively, +2.41/+0.34pcts year over year, respectively. The 2024Q1-3 sales/management expenses ratio was 27.55%/8.81%, respectively, -1.48/+0.54 pcts year over year; 2024Q3 was 26.13%/8.06%, respectively, +0.23/+1.03 pcts year over year, respectively. Net operating cash flow performance was good, and sales repayments declined year-on-year. Net cash flows from operating activities for 2024Q1-3/2024Q3 were 0.032/0.276 billion yuan, respectively, and -0.015/0.364 billion yuan for the same period last year; sales repayments were 2.219/0.922 billion yuan, respectively, or -2.29%/-11.62% year-on-year, respectively. As of the end of 2024Q3, the contract debt was 0.186 billion yuan (an increase of 0.063 billion yuan over the previous month).

Brewing is under pressure in stages, and fruit tea grows faster

By product, 2024Q1-3 brewed product/ready-to-drink revenue was 1.11/0.801 billion yuan, respectively, -8.27%/+7.89%, respectively; 2024Q3 revenue was 0.496/0.254 billion yuan, respectively, -14.88%/+17.82%. In terms of brewing, we are currently in the inventory removal stage. The year-on-year decline in Q3 is mainly affected by overall environmental pressure, and channels are less willing and cautious; in terms of ready-to-drink, Q3 fruit tea performed well, and is expected to grow by more than 40%, mainly due to the low base last year. Combined with the company exploring new brand positioning and new consumption scenarios for fruit tea this year; the year-on-year decline in frozen lemon tea revenue is expected to be related to the suspension of online delivery. Looking at the subregion, 2024Q3's basic market performance was steady, with revenue of 0.363 billion yuan (up 4% from the same period); revenue in central and southwest China declined slightly, to 0.111/0.083 billion yuan, respectively, or -5%/-12% year over year, respectively. By channel, the revenue of 2024Q3 distributors/e-commerce, export/direct operations was 7.10/0.025/0.005/0.011 billion yuan, respectively, -3%/-46%/-8%/-15%, respectively. E-commerce and direct business revenue declined significantly year-on-year. By the end of 2024Q3, there were 1,851 dealers, an increase of 320 over the beginning of 2024.

Profit forecasting

We believe that the company's brewing season is under slight pressure, focusing on the Q4 peak season; fruit tea performs well in beverages, and frozen lemon tea needs to be promoted and adjusted; we are optimistic about the development of the company's ready-to-drink sector in the long term. According to the three-quarter report, we slightly adjusted the company's 2024-2026 EPS to 0.70/0.87/1.04 (previous value was 0.70/0.80/0.92) yuan, respectively, and the corresponding PE was 19/15/12 times, respectively, maintaining the “buy” rating.

Risk warning

Downward macroeconomic risks, shortfall in growth in the ready-to-drink sector, risk of rising raw materials, falling short of expectations in the brewing sector, risk of seasonal fluctuations, etc.