Incident: The company released its 2024 three-quarter report. The company's main revenue for the first three quarters of 24 was 2.717 billion yuan, up 5.22% year on year; net profit to mother was 0.203 billion yuan, up 28.21% year on year; of these, Q3 2024 main revenue was 0.936 billion yuan, down 1.11% year on year; net profit to mother was 67.8333 million yuan, up 35.07% year on year.

Our analysis and judgment

1. Revenue side: Under pressure in the third quarter, the growth rate in the fourth quarter is expected to improve 24Q3 main revenue by 0.936 billion yuan, a year-on-year decrease of 1.11%. In the first three quarters, judging from the product revenue structure, frozen baked goods accounted for about 58% of revenue, down about 7% year on year. The main reason for the decline was due to the influence of supermarket channels; revenue from bakery ingredients (cream, sauce and other baking raw materials) accounted for 42%, an increase of about 30% year on year. The main contributing factor was the steady growth of new whipped cream products. Among them, cream products increased by more than 70% year on year, driven by various UHT cream products. According to the final sales customer category and channel, distribution channel revenue accounts for about 55%, up about 11% year on year, mainly due to the drive of whipped cream products and the company's policy support for leading dealers; supermarket channel revenue accounts for about 27%, down about 10% year on year, mainly due to the company's adjustment of listing arrangements for some products in core supermarket channels. The company will actively promote the storage and upgrading of new products; innovative channels such as food, tea and new retail account for about 18% of revenue, with a total year-on-year growth rate of about 20%.

2. Profit side:

In the first three quarters, the company's gross margin was about 32%, which was basically the same as the previous year. In terms of expenses, the company's sales and R&D expenses decreased in the first three quarters compared to the same period last year. The main reason was that the company strictly implemented the execution of the cost budget, reduced or reduced unnecessary expenses, and increased the input-output ratio of various expenses. The company focused on promoting the following issues in the third quarter: first, the company's second UHT cream factory completed sterility verification, trial production and strict testing of major single products in the third quarter, and will enter the formal production stage in the fourth quarter; second, continuing to implement cost control of various centers and departments to implement effective cost performance assessment and reward and punishment mechanisms; third, further optimizing the supply chain management system to build competitive supply chain delivery capabilities.

Investment advice:

We believe that net interest rates are expected to continue to improve as consumer promotion policies are gradually implemented to help food and beverage consumption recover significantly; the company's revenue is growing steadily, benefiting from increased capacity utilization, and the effects of reforms. We expect net profit to be 0.3/0.39/0.49 billion yuan for 24-26, corresponding PE of 23X/17X/14X, maintaining a “buy” rating.

Risk warning: Market competition increases risk; product promotion falls short of expectations; risk of fluctuating raw material prices.