Core views
The company's consumption scenario has been restored, the store model has been continuously optimized, stricter requirements have been put forward on the closing rate, and store opening is progressing steadily, and encouraging positive goals. The fall in costs gave the company room to adjust prices, and single-store performance is expected to recover in 2024. The company is on a track of 10% annualized growth, but the CR5 share of the industry is less than 5%, and there is plenty of room for improvement in market concentration.
As a leader in the nationalization of the industry, the company's performance is expected to continue to grow as industry concentration increases in the future. In addition to focusing on the main business and expanding terminal stores, the company uses the flexible production line of Sichuan cuisine, Baicai Baiwei to accurately develop efforts in multiple dimensions such as channels, supply chain, cross-border cooperation, and overseas travel.
occurrences
The company released its 2023 annual report and 2024 quarterly report
The company's revenue in 2023 was 3.55 billion yuan, -1.46% year on year, of which single Q4 revenue was 734 million yuan, and 2024Q1 revenue was 695 million yuan, -8% year on year; the company's net profit to mother in 2023 was 332 million yuan, +49.46% year on year, of which net profit from single Q4 was -0.1 billion yuan, -72.04% year on year, and 2024Q1 net profit of 54 million yuan, +13.89% year on year.
Brief review
Store openings are progressing steadily, and the performance of individual stores is under pressure
By product, the performance of lung tablets for couples was relatively stable, and spicy leisure products were weak. Revenue from fresh products in '23 was 3.04 billion yuan, or 1.71% year-on-year. Among them, revenue from husband and wife's lung fillets, whole poultry, spicy leisure, and other fresh goods was 10.99/8.79/3.14/ 711 billion yuan, respectively, +0.46%/-4.06%/-18.68%/+7.90%. The year-on-year Q1 lung fillets for husband and wife, whole poultry, spicy leisure, and other fresh products were -15.6%/-18.8%/-28.8%/+17.6%, respectively.
The company has successively launched new products such as pork head mixed with pork head, fatty beef in sour soup, fresh foodstuffs, crispy three slices, and chicken slices, further deepening the brand image of Ziyan Food's cold dishes. Other fresh products performed well.
By channel, revenue from distribution/direct operation/other models in '23 was 30.51/0.68%/+40.90%/+0.84%, respectively. Single store performance continued to be under pressure. At the end of '23, the total number of company stores reached 6205 (+8.96% year over year, net increase of 510 compared to the beginning of '22). The stores have covered more than 200 cities across the country, and the additional stores have all been franchised stores, which have slowed down from the net increase in the number of stores (535) in '22.
Increased profitability and generous dividend rates
The company's gross profit margin in 2023 was 22.46%, up 6.49 pcts year on year, mainly due to the year-on-year decline in raw material prices, such as the 23 annual gross profit margin of the core product, husband and wife lung tablets, which increased 18.75 pcts year over year, and the 24Q1 gross profit margin was 20.89%, up 2.20 pcts year on year. In 2023, the sales/management expense ratio was 6.13%/4.81%, compared with +2.32/+2.45 pcts. It is mainly due to the company developing new sub-brands, expanding new regions, increasing investment in advertising expenses, and increasing sales staff. In 24Q1, the company's sales/management expenses ratio was 5.22%/6.38%, +0.68/ -0.09pcts year-on-year.
The company's net interest rates after deducting non-return to mother in '23/24Q1 were 7.83%/5.58%, respectively, +2.79/+1.07pcts year-on-year. The company announced a cash dividend of 330 million yuan (tax included) for 23 years, with a dividend rate of 99.41%, corresponding to the current dividend rate of 4.1%, which is rich in dividend returns.
Explore new models and lay out multi-channel and new tracks
In addition to focusing on the main business to expand terminal stores, the company is also making precise efforts in multiple dimensions such as channels, supply chain, cross-border cooperation, and overseas travel. It has now formed a diversified development pattern. Using the flexible production line of Sichuan cuisine, Baicai Baiwei, and a comprehensive supply chain network, the company continues to explore new models of business development. For online To-C operations, the company continues to grow and expand its flagship stores and specialty stores on e-commerce platforms such as Tmall, JD, Douyin, and Pinduoduo, and has carried out in-depth cooperation with channels such as Hema Xiansheng, Metro, Meituan Grocery Shopping, and Dingdong Grocery Shopping; the To B side has successfully developed first-line domestic brand customers such as Grandpa and Cookin Food Exchange with high-quality products and an efficient supply chain. Feng Sijiao Beef, which the company acquired in 2022, has successfully crossed the 100 store threshold and doubled its revenue and profits. In May 2023, the company established an overseas division, successfully signed an Australian agency agreement, and reached strategic cooperation with Dahua Group and Chuangfeng Group in developing the US market.
Profit forecast and investment advice: Considering the company's single-store revenue pressure in 2023, which is expected to recover in 2024, the company's incentive target is positive. We expect the company's revenue for 2024/2025/2025/2026 to be 40.65/46.16/5.171 billion yuan, up 14%/12% year on year, and net profit of 4.04/470/531 million, respectively, up 22%/16%/13% year on year, maintaining the “buy” rating.
Risk warning:
1. Sales area concentration: The company's sales area is mainly concentrated in East China, and it invests a lot of market development resources in East China. If consumption habits change in the East China region in the future or the market share of the company declines due to intense competition in the marinated food market, it will have a certain impact on the company's business performance.
2. Food quality control: The company's marinated food is mainly fresh products, with a shorter shelf life. Product quality control requirements are more strict than packaged products.
If food quality or food safety issues occur due to negligence in the company's operation process in the future, it will adversely affect the company's brand image and business performance.
3. Market development risk: The company's main products are highly flexible, have a high upper limit, and are highly adaptable according to local tastes. For newly developed sales channels, the company invests heavily in the short term, but the return on investment cycle may still be uncertain due to taste.