Core viewpoints

As the Dragon Boat Festival this year is relatively late than last year, the revenue and profits of some zongzi products have been postponed to the third quarter. The company actively adjusts its business strategy, relies on the influence of the "Wufangzhai" brand, creates the second sub-brand "Chicken Brand" and "Jiahu detail", actively develops the non-rice dumpling business, takes quick-freezing and baking as the main items, and creates a daily sales "breakfast scene". At the same time, around the "one-stop solution to family breakfast refreshments + seasonal gifts" to explore new business type chain model, broaden the chain development space, the future is worth looking forward to.

Event

The company releases the third quarter report of 2023

In the first three quarters of 2023, the company realized operating income of 2.415 billion yuan, with a year-on-year growth of 6.71%, and net profit attributable to parent company of 241 million yuan, with a year-on-year growth of 5.65%;

The company's single Q3 operating income was 550 million yuan, with a year-on-year growth of 20.86%, and the net profit attributable to the parent company was-15 million yuan, down 7.9% year-on-year.

Brief comment

Zongzi sales recovery, mooncake performance weak

In terms of products, in the first three quarters of the company, zongzi/mooncakes/meals/eggs, pastries and other products achieved operating income of 18.8/1.6/1.1/220 million yuan respectively,+10.6%/-13.3%/+2.4%/-3.9% respectively compared with the same period last year, of which single Q3 achieved revenue of 3.0/1.6/0.4/0.4 million yuan respectively. Year-on-year +60.2%/-13.3%/+4.9%/+6.7% respectively. As the Dragon Boat Festival this year is relatively late compared with last year, the revenue and profit of some zongzi products in Q2 were deferred to Q3 recognition. Mid-Autumn gift consumption is weak, the company's mooncake sales pressure, year-on-year decline, meals and eggs, pastry and other businesses year-on-year growth.

In terms of channels, the company's chain/e-commerce/supermarket/dealer/other direct sales channels achieved operating revenues of 3.0/7.9/2.7/8.8/130 million yuan respectively in the first three quarters, with year-on-year changes of +27.5%/+6.5%/-12.7%/+11.6%/-10.2%, of which Q3 achieved operating revenues of 0.82/3.40/0.25/0.61/0.27 million yuan respectively. Year-on-year changes were +9.5%/+29.5%/-1.3%/+6.9%/+22.3%, respectively. E-commerce business achieved rapid growth, and the decline of supermarket channels narrowed. As of Q3 2023, the Company had 737 dealers, a net increase of 44 compared with Q2 2023 and a net increase of 30 compared with the beginning of the year.

The expenses are well controlled, and the non-net profit loss is slightly narrowed.

At the cost end, the price fluctuation of main raw materials such as pork, rice and packaging materials is relatively stable. The gross profit rate of the company in the first three quarters is 38.57%, with a year-on-year decrease of 0.50pcts, among which the gross profit rate of single Q3 is 28.67%, with a year-on-year decrease of 0.03pcts. The Company strengthened expense control. The sales/management expense ratio in the first three quarters was 18.78%/5.76% respectively, with year-on-year change of +0.02pcts/+0.4pcts. Among them, the sales/management expense ratio in Q3 was 25.23%/6.87% respectively, with year-on-year change of-0.43pcts/-1.68pcts. Single Q3 company deducted non-parent net profit-15.9 million yuan, the same period last year-16.8 million yuan, the loss narrowed slightly.

Optimize offline stores Explore new business chain mode, enhance brand power through diversified marketing The company continues to optimize channel layout. In 2022, it will implement the strategy of "shrinking, turning and closing", comprehensively sort out stores, close nearly 100 stores successively, explore small community stores with "retail + light catering" as the main body, explore new business chain mode centering on "one-stop solution to family breakfast snacks + festival gifts and gifts", and broaden chain development space. As of the first half of the year, 6 direct-sale festival gift shops and 7 franchised festival gift shops have been established.

At the same time, the Company further explored the operation efficiency of its branches, transformed and upgraded some branches into seasonal food collection direct-sale stores, and 4 urban branches of more than 30 branches and offices of the Company have realized transformation. In the first half of the year, the Company cooperated with 23 brands such as Oriental Pearl, Small Pot Tea, Bama Tea Industry, Meet Small Noodles and Food Laboratory to create joint IP. The Company cooperated with two brands to refresh the innovation power of old brands, completed 86 online cross-border activities and continuously led hot topics.

Profit forecast and investment advice: The company is a leading enterprise in the traditional food zongzi industry, with strong brand awareness. The Company is still in the stage of increasing market share, and the production capacity investment and the completion of smart park are conducive to the further growth of the Company's revenue. Due to the weak consumption in the Mid-Autumn Festival, we lowered our profit forecast. It is estimated that the revenue from 2023 to 2025 will be 26.85/31.98/37.91 billion yuan respectively, with a year-on-year growth of 9%/19%/19%, and the net profit attributable to the mother will be 1.97/2.53/3.25 million yuan, with a year-on-year growth of 43%/29%/28%, maintaining the "overweight" rating.

Risk Tips:

1. The risk of national expansion is less than expected: the sales scope of the company is mainly in East China, accounting for about 50%, while the growth rate of market revenue outside East China is faster than that in East China. If the company does not expand as expected in the market outside East China, it may have a greater impact on the company's revenue.

two。 The promotion of new products is not as expected: the company tries to explore new opportunities in areas such as baking and quick freezing, and launches a series of new products, but the new products are quite different from the original zongzi products, and consumers' tastes and preferences are quite different. the promotion of the company's new products may not be as expected.

3. Competition intensifies the risk of exceeding expectations: the company's traditional festivals such as zongzi, moon cakes and cakes will intensify competition in the food track, which will lead to the continuous growth of advertising, promotion and other market costs, affecting the profitability of enterprises.