After 23 years of steady growth, steady operation continued in 24Q1, and the restaurant business performed well. In 23, it achieved revenue of 4.901 billion yuan/ +19.17%, and achieved net profit of 550 million yuan/ +5.21%. Among them, the mooncake/quick-freezing/catering business achieved revenue of 16.69/10.663 billion yuan, an increase of 9.88%/0.33%/65.66% year-on-year. The quick-frozen growth slowed due to the high base, and the catering business benefited from the rapid growth of newly opened stores. In 23, a total of 14 new restaurants were added, including 4 Guangzhou restaurants and 10 new pottery houses. F&B outlets, plus the acquisition of 5 additional authorized restaurants. 24Q1 achieved revenue of 1,012 million yuan/ +10.04%; achieved net profit of 0.71 million yuan/ +2.22%, of which mooncake revenue was 9.03 million yuan/ -20.09%; quick-frozen food revenue was 295 million yuan/ -4.1%, which is expected to be caused by a weakening in the home consumption scenario; other food business revenue of 299 million yuan/ +27.56%, achieved rapid growth or due to increased consumer demand for prepared dishes; catering revenue of 384 million yuan/ +13.33%, which grew faster by region, as the number of stores increased. In 24Q1, Guangdong Province achieved revenue of 454 million yuan/ +6.62%, while outside Guangdong Province achieved revenue of 137 million yuan/ +13.69%.

The gross margin declined in 24Q1, and the cost ratio was continuously optimized and controlled. The gross profit margin in '23 was 35.63%, which was basically the same year on year. The sales expense ratio was 10.32%, the year-on-year -0.42pct, the management expense ratio was 9.51%, the year-on-year +0.27pct, the R&D expenses ratio was 1.78%, the year-on-year net profit margin was 11.22%, and the year-on-year -1.42pct. The 24Q1 gross profit margin was 29.74%, or 2.65pct year on year, which is expected to result from changes in product structure; sales expenses ratio 9.78%, -0.33pct year on year; management expenses ratio 8.40%, -0.73pct year on year; R&D expenses ratio 1.78%, +0.04pct year on year; net profit margin 7.02%, -0.48pct year on year, mainly due to declining gross margin.

Production capacity projects continue to advance to enhance the company's long-term development potential. In 2023, the frozen production workshop at the company's Xiangtan base was completed for trial production, providing strong support for the development of the company's frozen food business. The Guangzhou base upgrade project was approved, and the park's maximum floor area ratio was raised from 1.549 to 3.5. Ricoufu Company selected a site in Panyu District of Guangzhou to establish a deep processing base for meat products, improve the industrial layout with meat products as the core, optimize the product matrix, and enhance long-term development benefits.

Due to the slow recovery in demand for frozen products, we predict that the company's earnings per share for 2024-2026 will be 1.15/1.39/1.60 yuan (1.57/1.84 yuan for 24-25 years before adjustment). Using a comparable company valuation method, the company will be given a price-earnings ratio of 16 times for 24 years, and the corresponding target price is 18.40 yuan, maintaining the purchase rating.

Risk warning

The promotion of new products fell short of expectations; the development of markets outside the province fell short of expectations; the recovery of consumption power fell short of expectations.