Description of the event
In 2024Q1, Tianwei Foods achieved total operating revenue of 853 million yuan (+11.34%), net profit to mother of 176 million yuan (+37.2% year over year), after deducting non-net profit of 147 million yuan (+23.47% year over year).
Incident comments
The boom in hot pot products is under pressure, and the combination of food extracts accelerates the growth of online channels and condiments for Chinese dishes.
Looking at 2024Q1 by channel, offline channels were 719 million yuan (+2.94% year over year); online channels were 132 million yuan (+101.23% year over year). Looking at 2024Q1 by product, hot pot seasoning was 293 million yuan (YoY +1.18%); Chinese cuisine seasoning was 495 million yuan (YoY +17.75%); Sausage and bacon seasoning was 0.3 million yuan (YoY +21.79%); and others, 0.3 billion yuan (YoY +11.51%). Looking at the subregions in 2024Q1, the east was 156 million yuan (+6.88% year over year); the south was 87 million yuan (+11.15% year over year); the west was 311 million yuan (+23.35% year over year); the north was 80 million yuan (+8.2% year over year); and the central region was 217 million yuan (+1.56% year over year).
Reduced costs boosted gross profit margins, diversified marketing campaigns, and increased profits from investment.
The company's net profit margin increased by 3.89pct to 20.63% year on year in 2024Q1, with gross margin +3.44pct to 44.05% year on year, and the period expense ratio +1.36pct to 22.88% year on year. Detailed changes: sales expenses ratio (+2.18 pct year over year), management expenses rate (-0.83 pct year over year), R&D expenses rate (-0.06 pct year over year), and financial expenses ratio (+0.07 pct year over year).
The sharp improvement in profitability is expected to be mainly due to falling prices of oil and fat (butter, rapeseed oil) and agricultural and sideline vegetable products. The cost side is expected to remain low in the next quarter; the increase in sales expenses is mainly due to an increase in diversified marketing investment such as online planting, live streaming, and content e-commerce. In addition, investment income increased sharply by 21.71 million yuan compared to the same period last year (+171% year over year), mainly due to the company's exit and an increase in investment and financial management income from Qianjihe, which increased the company's net profit a lot.
Outreach collaboration is highlighted, the incentive system is consistent, and rapid growth can be expected throughout the year.
The company's outward foodstuffs continue to increase revenue and profits on the reporting side, and reinforce the company's small B-side product matrix, and the channel model is misaligned. The company launched a new employee stock ownership plan, which also continued the historically consistent equity incentive mechanism. The long-term upgrade logic of complex products continues, and the competitive landscape on the racetrack remains healthy and orderly. The company set positive business goals (15% increase in revenue and 20% increase in net profit) in 2024, which is expected to achieve better growth performance than the industry. The company's net profit for 2024/2025 is estimated to be 566.687 million yuan, EPS is 0.53/0.65 yuan, and the corresponding PE is 26/22 times, respectively, maintaining a “buy” rating.
Risk warning
1. Risk of slow recovery in demand; 2. Industry competition further exacerbates risks; 3. Risk of changes in consumer consumption habits; 4. Risk that prices of some raw materials will continue to rise, etc.