On April 25, 2024, Happy Home released its 2024 quarterly report.
Key points of investment
Revenue is in line with expectations, and profits are under pressure due to increased spending
Revenue was in line with expectations, and profits were under slight pressure. 2024Q1 had total revenue of 551 million yuan (up 6.61%), net profit attributable to mother of 82 million yuan (same decrease of 3.74%), and net profit of 80 million yuan after deducting non-return to mother net profit of 80 million yuan (same decrease of 5.14%). Cost improvements have led to increased gross margins, and increased investment has put pressure on profitability. 2024Q1 has a gross profit margin of 38.70% (+1.84pcts year over year), mainly due to an increase in the share of high-margin coconut milk products to raise the average gross margin level. Furthermore, the reduction in the cost of raw materials such as oranges has led to an increase in the gross margin of canned goods. The 2024Q1 net profit margin was 14.90% (-1.60pcts year on year). The main reason was that the company increased network expansion and channel development, and the sales/management expense ratio was +3.87/0.36 pcts year on year, respectively. Sales repayments grew at a normal pace, and net cash flow from operating cash outflows at the beginning of the year was negative. 2024Q1's sales repayment was 517 million yuan (up 6.51% from the same period), and net operating cash flow was -40 million yuan (-53 million yuan in the same period last year), mainly due to the large amount of raw materials purchased at the beginning of the year, which is a normal change.
Coconut juice has grown in double digits, and network development is in progress
2024Q1 drinks/canned goods revenue was $311/220 million, respectively, +23.47%/-15.86% year-on-year, respectively. Among them, 2024Q1 coconut juice's revenue was 267 million yuan (up 25.96% from the same period), mainly due to the good recovery of the Spring Festival banquet drinking scene and the results of the company's network development. Looking at 300,000 new outlets this year, it is expected that 300,000 new outlets will contribute greatly to the increase in coconut juice revenue. 2024Q1 canned yellow peach/canned orange revenue was 0.89/ 0.62 billion yuan, respectively. Among them, canned yellow peaches were mainly due to the sharp increase last year leading to a high base. This year, the company promoted canned fruit into snack sales channels and separated products with different packaging specifications from traditional channels, and is expected to contribute a certain amount of volume. This year, the company will also step up efforts to promote the sale of coconut shark coconut water. Combining sports ambassadors and corresponding scenario promotion, it officially launched retail and freezer displays in March. Currently, the marketing feedback is quite positive.
Profit forecasting
We are optimistic that C-end coconut juice will improve the product matrix, and at the same time increase the sales share in high-tier cities with products such as coconut water; the canned side will continue to build canned fruit to stabilize the basic market; and B-end thick coconut milk products will use their product-side and supply-side advantages to enter the coffee circuit, contributing to new growth. According to the company's quarterly report, we adjusted the company's 2024-2026 EPS to 0.73/0.88/1.07 yuan (previous value was 0.73/0.85/0.99 yuan), and the current stock price corresponding PE was 21/17/14 times, respectively, to maintain a “buy” investment rating.
Risk warning
Risks of rising raw material prices; new business market feedback falling short of expectations; risk of investment falling short of expectations.