Core views
Currently, the hot pot ingredients and prepared dishes industry is still in a period of growth. Benefiting from catering companies' demand to control costs and reduce fees and increased consumer penetration, the prepared food industry is still in a period of rapid growth.
Under the “three-way approach” business strategy and the business model of “self-production+supply chain branding+merger and acquisition” in the prepared dishes sector, the company continues to promote the industrial layout and transformation and upgrading of the company's prepared dishes in an orderly manner in accordance with the established strategy. Prices of raw materials such as surimi have declined, and the product structure has been optimized, which has led to an increase in the company's gross margin. The company's expenses are well controlled, which has led to an increase in the company's profitability and impressive profit growth. 2023Q4 is affected by increased competition and high temperatures in the rice and noodle industry, and sales are relatively weak. In 2024, the company will actively enter customized channels and booming categories, which is expected to contribute to the increase.
occurrences
The company released its 2023 annual report and 2024 quarterly report
In 2023, the company achieved revenue of 14.045 billion yuan, +15.29% year over year; net profit to mother of 1,478 billion yuan, +34.24% year over year; net profit after deducting non-net profit of 1,365 billion yuan, +36.80% year over year. Among them, 23Q4 achieved revenue of 3.774 billion yuan, -6.27% year on year; net profit to mother of 356 million yuan, -13.41% year over year; deducted non-net profit of 338 million yuan, -13.93% year over year.
In 24Q1, the company achieved revenue of 3.755 billion yuan, +17.67% year on year; net profit to mother of 438 million yuan, +21.24% year on year; deducted non-net profit of 420 million yuan, +21.56% year over year.
Brief review
The main business grew steadily, and the hot pot ingredients improved significantly
By product, the company achieved revenue of 25.4/26.3/44.1/3.93 billion in 2023, +5.4%/+10.2%/+11.8%/+29.8%; 23Q4 noodle rice/meat products/surimi products/dishes revenue was -4.3%/-6.3%/-3.6%/-10.7%, mainly affected by various factors such as warm winter weather in 23Q4 and the wrong Spring Festival.
24Q1's revenue for frozen noodles/ meat products/ surimi products/ dishes was +4.4%/+27.7%/+31.5%/+12.3%. The noodle rice business was disrupted by external competition, but the quick-frozen meat products and quick-frozen surimi products business improved significantly year-on-year. The increase in the volume of the new Marunzhizun series products and sales of the fresh-frozen series products continued to grow, driving the company to a successful start.
By channel, the company's dealer/direct-operated/supermarket/new retail/e-commerce revenue in 2023 was 113.7/10.7/8.5/44/320 million, with year-on-year changes of +16.0%/+28.9%/-13.4%/-0.3%/+145.9%, respectively. Among them, the decline in supermarkets was mainly due to a decline in passenger traffic. 24Q1 revenue from each channel was +22.6%/+0.02%/-6.3%/-8.3%/+35.6%, respectively. Distribution channels grew steadily, and sales growth on platforms such as Douyin and Kuaishou drove the rapid development of e-commerce.
Cost reduction, structural optimization, and further improvement in profitability
The gross margin for 23 years was +1.3 pct to 23.2% year on year (+2.6 pct to 26.3% year on year in 23Q4), and the gross margin of the 24Q1 company was 26.55%, +1.85pct year on year, mainly due to the year-on-year decline in the purchase price of raw materials such as surimi, an increase in the share of high-end products such as fresh packaging, and the release of scale effects. The company's 23-year sales/management expense ratio was 6.6%/2.7%, respectively, -0.6pct/-0.1pct. In addition, Xinliuwu had some goodwill impairment charges. The company's net profit margin for 23 years was +1.5pct to 10.5% year on year, of which 23Q4 was -0.8 pct to 9.4% year on year. The sales/management expenses ratio of the 23Q1 company was 7.5%/3.1%, respectively, +0.1/+0.3 pct year on year, equity incentive expenses increased year on year, and 24Q1 company's net interest rate to mother was +0.3 pct to 11.7% year on year.
Accelerate the layout of pre-prepared dishes and enter a potential circuit
In 2024, the company will actively embrace TTCOM channel customization, big B customization, and new retail customization, adapt to the trend of channel fragmentation and differentiation, launch products with different specifications and flavors for different channels, expand the TTCOM department, and establish a new retail department. In addition to hot pot balls and rice and noodle products, the company broke into a booming category and launched innovative products using fish paste, chicken, and pork as ingredients in combination with sausage grills, such as cuttlefish roast. Currently, the prepared food industry is still in a period of rapid growth. Supply-side cold chain logistics are continuously being improved, and household demand for meal preparation and the demand for cost reduction and efficiency on the catering side are jointly promoting the rapid development of the industry. Under the company's “three-way approach” business strategy and the “self-production+supply chain branding+merger and acquisition” business model of the prepared dishes sector, the company further promoted the industrial layout and transformation and upgrading of the prepared dishes field.
The company increased its market share and optimized the product structure through continuous promotion of the C-end Seoken series and the B-end Marunoson series, and carried out a certain degree of consumption upgrade through new products of Seokushen 1.0-5.0 and product upgrades of Marunoson 1.0 and 2.0. At the same time, when the automation efficiency and production capacity of the company's new plants climbed, the scale effect gradually showed a decline in driving costs, and the company's profit margin is expected to increase.
Profit forecast: The company is expected to achieve revenue of 161.03, 18.2.19, 20.551 billion yuan in 2024-2026, and achieve net profit of 17.28, 19.93, and 2,286 billion yuan, corresponding to PE of 14.3X, 12.4X, and 10.8X in 23-25, maintaining a “buy” rating.
Risk warning:
1. Consumption recovery falls short of expectations: Catering customers account for a large share of the company's main business, and the weak recovery in food and beverage consumption has had a certain impact on the company.
If the subsequent recovery of public catering falls short of expectations, it will cause demand from B-side customers to decline and affect the company's related business revenue.
2. Competition in the prepared food industry intensifies: As the boom increases, a large number of new entrants to the prepared food industry continue to pour in. The intensification of market competition may cause the company's cost investment to increase, which will have an impact on the company's profit level.
3. Rising raw material costs: In recent years, the costs and prices of raw materials and packaging materials have fluctuated greatly, as well as increased shipping costs per unit product, and rigid increases in employee wages, etc., which may cause enterprises to face greater cost pressure. If costs rise above expectations, it will have a clear impact on corporate profits.