Incidents:
Tianwei Foods announced its 2024 quarterly report. In 24Q1, it achieved operating income of 853 million yuan, +11.34% year over year; net profit to mother was 176 million yuan, +37.20% year over year; net profit after deducting non-return to mother was 147 million yuan, +23.47% year over year.
The growth rate of the base material has slowed, and the reshuffled winter adjustment continues to increase at a high rate
By product, 24Q1 Hot Pot Seasoning/Chinese Dish Seasoning/Sausage and Bacon Seasoning/Others achieved revenue of 2.9/4.9/0.3/0.3 billion yuan respectively, +1.2%/17.8%/21.8%/11.5% year-on-year. The growth rate of hot pot base was affected by Dahongpao's strategic adjustments, and the growth rate of hot pot seasoning continued to grow rapidly. At present, the first batch of crayfish has been sold on the market, and the company has steadily increased its product potential and is progressing smoothly. By channel and region, 24Q1 achieved offline/online revenue of 72/130 million yuan, +2.9%/101.2% YoY, East/ South/ West/ North/ Central +6.9%/11.1%/23.3%/8.2%/1.6%, adding 18 dealers to 3183, and steadily improving dealer quality.
Raw material cost down+product structure increase, gross margin achieved 44.1% 24Q1 achieved gross profit margin of 44.1%, compared to +3.4pct, mainly due to declining raw material costs, product structure improvement (high gross profit compound ratio increased from 55% in 23Q1 to 58% in 24Q1), and product upgrades and iterations of all C-end products to remove preservatives. The 24Q1 sales/management/R&D expense rates were 17.0%/5.1%/1.1%, respectively, compared to +2.2/-0.8/-0.1pct. The increase in sales expenses was mainly due to increased investment in promotion platforms such as live streaming and Douyin, and the cost efficiency ratio of management and R&D expenses. Investment income reached 34.38 million yuan, +171% year-on-year, mainly due to withdrawal income from Senkihaku Investment and financial management income. The comprehensive net interest rate to mother was 20.6%, +3.9 pct year on year, deducted net interest rate of 17.2% without return to mother, and +1.7 pct year over year.
Investment advice
In 2024, the company accelerated the layout of the base circuit through new thick hot pot products+non-spicy soup, and continued steady growth. At the same time, Chinese polymorphic products based on food extracts+ regional single products are expected to continue to develop rapidly, and the small B side is expected to contribute to the increase in volume as dealers develop. The 2024 target is set steadily, and we look forward to unleashing the company's growth momentum. We expect the company's revenue for 2024-2026 to be 36.3/42.5/4.97 billion yuan, respectively, and net profit of 55/ 6.5/760 million yuan respectively (without considering the cost factors of the employee stock ownership plan). Maintaining a buy-A investment rating, the target price for 6 months is 15.44 yuan, which is equivalent to a dynamic price-earnings ratio of 30x in 2024.
Risk warning: increased competition in the industry; fluctuations in raw material prices; food safety, etc.