Incident: The company released its 2024 quarterly report. During the reporting period, the company achieved revenue of 2,646 billion yuan, a year-on-year decrease of 14.87%; realized net profit of 727 million yuan, a year-on-year decrease of 29.43%; and realized net profit withheld from non-mother of 709 million, a year-on-year decrease of 28.67%. In line with the performance forecast, in line with market expectations.
Investment rating and valuation: Maintaining profit forecasts, net profit for 24-26 is estimated to be 19.9 billion yuan, 22.5 billion yuan, and 2.50 billion yuan, respectively, up 13.7%, 13.2%, and 11.4% year-on-year respectively. The corresponding EPS is 1.17, 1.32, and 1.47 yuan, respectively. The latest closing price for 24-26 PE is 13x, 12x, and 11x, respectively, maintaining an increase rating. The company has completed sales structure and organizational structure adjustments. In the future, the company will continue to follow the strategic direction of “multi-brand, large-category, omni-channel single focus”, lay out more new tracks for large single products, and comprehensively lay out high-potential market segments. Against the backdrop of increased public attention to health, the company can be expected to grow for a long time.
The pressure on the base led to revenue pressure, and revenue increased 7.73% from 22Q1 to 24Q1. According to the company announcement, 1) Domestic business: By channel, the 24Q1 company achieved revenue of 1,722 million yuan from offline channels, down 7.55% year on year; online channels achieved revenue of 909 million yuan, down 26.53% year on year. The large decline in online channels was mainly influenced by the base figure. Online channels also increased by 90.98% in 23Q1. By brand, the main brand “Tomson Beijian” achieved revenue of 1,545 billion yuan, a decrease of 17.74%; the large single product “Jianli Duo” achieved revenue of 373 million yuan, a year-on-year decrease of 2.06%; Life-Space domestic products achieved revenue of 120 million yuan, a year-on-year decrease of 29.48%. The company upgraded its two major categories this year, protein powder and Jianliduo. Among them, Jianliduo's upgraded products have been launched and are now beginning to be shipped to some distributors. Jianliduo's revenue is expected to return to positive growth in 24 years. 2) Overseas business: LSG achieved revenue of 253 million yuan, a year-on-year decrease of 5.08% (4.74% year-on-year decrease in Australian dollars).
Profitability is being pressured in the short term due to rising cost rates. According to the company announcement, 24Q1 achieved a gross profit margin of 69.9%, a year-on-year decrease of 0.42pct. The 24Q1 sales/management/R&D/finance expenses ratio was 31.2%/4.8%/1.2%/-0.5%, respectively, +6.6pct/+1.4pct/+0.3pct/+0.0pct. The company implemented a “multi-brand, omni-channel, all-category” strategy, which affected cost efficiency in the short term. At the same time, the company's Q1 revenue declined year-on-year, leading to a marked increase in sales expenses. Overall, due to cost-side pressure, the 24Q1 company's net interest rate fell 6.61 pct year on year to 27.17%.
The catalyst for stock price performance: the growth of large single products exceeded expectations
Core hypothetical risks: demand fluctuations due to policy changes, risk of impairment of goodwill, food safety issues