The company announced its 2023 annual report. In 2023, the company achieved total revenue of 6.806 billion yuan, -1.13% year on year; realized net profit to mother of 803 million yuan, -17.75% year over year. In the fourth quarter of 2023, the company achieved total revenue of 2,327 billion yuan, -6.90% year-on-year; realized net profit of 297 million yuan, or -15.01% year-on-year.
Demand for sunflower seeds is under pressure, and the toughness of nuts is growing. The company's snack food business revenue in 2023 was -1.5% YoY. By category, revenue from sunflower seed products was -5.4% year-on-year, mainly due to weak consumer demand and the impact of low price competition. Among them, revenue from the high-end product Kwai Chun is expected to achieve high double-digit growth, and new product melon seeds are also growing rapidly. Revenue from the original pumpkin seeds declined slightly year on year, and the decline in pumpkin seeds is relatively large. Revenue from nut products was +8.0% year-on-year, mainly due to continued channel expansion. Among them, daily nut roof box products have a good penetration effect in third- and fourth-tier city channels, and revenue is expected to achieve high double-digit growth. In the fourth quarter, the company's revenue was -6.9% year-on-year due to delays in peak season preparation times and weak social spending intentions due to the Spring Festival misschedule.
Costs are under pressure, and profitability is impaired. In 2023, the company's gross profit margin was 26.8%, of which sunflower seed/nut gross margin was 25.2%/31.6%, respectively, -7.9/+1.0pct year on year. The sharp decline in gross margin of the sunflower seed business was mainly due to a sharp increase in raw material procurement costs; the year-on-year increase in the gross margin of the nut business was mainly due to a decrease in the comprehensive procurement cost of raw materials and the optimization of the product structure. In terms of expenses, the sales cost rate/management expense ratio was -1.1/-0.7 pct compared to the same period, mainly due to reduced employee incentive bonus payments and promotion cost savings. The net profit margin for the whole year was 11.8%, -2.4pct year over year. In the fourth quarter, the company achieved a net interest rate of 12.8%, -1.2pct year on year. The pressure on sunflower seed costs was still the main desire to damage profitability, but the decline in net interest rate to mother in the fourth quarter narrowed month-on-month, mainly due to the company's lean cost efficiency.
Channel expansion continues to drive revenue growth, and falling costs help release profit flexibility. In terms of the sunflower seed business, the company is promoting channel decline and intensive cultivation of weak market channels, and is actively developing new channels, such as mass sales of snacks, tea, and catering. In terms of the nut business, the company continues to expand channels using daily nut roof boxes and nut gift boxes as the two major drivers, and the nut business maintained a good growth trend. In the first quarter of 2024, the company's product sales were strong during the peak season of the Spring Festival. Revenue growth is expected to pick up, and the cost of sunflower seed raw materials has fallen by about 10% from the previous high. Profitability is expected to improve significantly in 2024, which will help release profit flexibility.
Profit forecast and investment advice: Considering the significant reduction in the cost of major raw materials, the company's ability to control expenses, and the gradual restoration of profitability, we maintain our revenue forecast and slightly increase our 2024-2024 profit forecast: the company is expected to achieve total operating income of 76.2/8.56 billion yuan in 2024-2025, and net profit to mother of 10.2/1.09 billion yuan (the previous forecast value was 97/1.09 billion yuan). The current stock price corresponding to 2024/2025 PE is 17.5/15.1 times, respectively, maintaining a “buy” rating.
Risk warning: The consumer recovery environment is slowing down; sales in the melon seed category are poor; the growth of the nut category falls short of expectations; competition in the industry has intensified; and the cost and price of raw materials has risen sharply.