occurrences
On April 25, 2024, Tianwei Foods released its performance report for the first quarter of 2024.
Key points of investment
Declining costs are beneficial to profits, and the cost investment structure continues to be optimized
The company's total revenue for 2024Q1 was 853 million yuan (up 11% from the same period), and net profit to mother was 176 million yuan (up 37% from the same period), mainly due to increased sales, lower procurement costs for major raw materials, and increased investment income. Benefiting from cost reduction/product structure optimization, 2024Q1's gross margin increased by 3 pct to 44.05%, and sales/management expense ratios were 17.02%/5.07%, respectively, +2 pct/-1pct, respectively. The increase in sales expenses is expected to be mainly due to an increase in content e-commerce channel fees. Overall, the company's net interest rate increased by 4pct to 20.90% in 2024Q1. As the company continuously adjusts its fee investment structure and reduces promotional giveaway efforts, there is still room for improvement in the company's net interest rate.
Continuing to create strategic single products that are not spicy soup, the growth rate of hot pot seasoning is slowing down under the pain of continuous volume restructuring. 2024Q1's hot pot seasoning revenue is 293 million yuan (same increase of 1%). The main reason is currently in a period of adjustment pain brought about by the merger of Dahongpao's C-end products into retail channels. In 2024, the company will promote healthy iteration of hot pot base, while increasing R&D and marketing efforts to create large strategic products. The hot pot seasoning product structure is expected to continue to be optimized. Chinese polymodulation increased customer development. 2024Q1's revenue for Chinese cuisine seasoning was 495 million yuan (same increase of 18%). In response to Chinese polymodulation, the company plans to increase its customer concentration and develop new customers. The distribution of 2024Q1 crayfish seasoning is superior to the same period in 2023, and is expected to contribute to the increase throughout the year. The growth rate of other products was steady. The revenue of 2024Q1's sausage and bacon condiments/other products was 0.33/30 million yuan respectively, up 22%/12%, respectively.
Develop small B dealers to empower restaurants, and develop small B dealers to incrementally develop small B dealers. As of 2024Q1, the company had offline channel revenue of 719 million yuan (same increase of 3%). As of 2024Q1, the company had a total of 3183 dealers, a net increase of 18 from the beginning of the year. The company continues to develop small B dealers to enable the expansion of wholesale food and beverage channels; currently, dealers guarantee healthy inventory through multiple purchases, and the company continues to promote excellent business support policies to enhance channel profitability. 2024Q1 Food extract technology reform guarantees online sales. 2024Q1's online channel revenue is 132 million yuan (same increase of 101%), mainly contributing to food extract. Subsequent food extract continues to focus on online channels. It is expected that after the technical reform in May 2024, production capacity will meet online sales needs throughout the year. At the same time, the company actively matches resources and pays more attention to content e-commerce channels to help achieve the goal of increasing the sales revenue share of medium- to long-term e-commerce channels to 20% to 30%. Develop regional products and lay out the national market. 2024Q1's revenue in the east/ southern/ western/ northern/ central regions was 1.56/0.87/3.11/0.80/217 million yuan respectively, up from the same period
7%/11%/23%/8%/2%. Subsequent companies will develop differentiated polymodulation products for different regions to promote balanced regional development.
Profit forecasting
As a leader in the multi-modulation circuit, the company continues to consolidate the competitiveness of hot pot ingredients and Chinese polymodulation through product promotion. At the same time, it also relies on food extracts to make up for the shortcomings of small and medium-sized online B-end customers. With endogenous epitaxial two-wheel drive, it is expected to fully gain market share. According to the first quarterly report, EPS is expected to be 0.52/0.65/0.77 yuan in 2024-2026, and the current stock price is 26/21/18 times PE, respectively, maintaining a “buy” investment rating.
Risk warning
Macroeconomic downturn risks, consumption recovery falling short of expectations, increased industry competition, regional expansion falling short of expectations, capacity construction or utilization falling short of expectations, etc.