occurrences

On August 30, 2024, Zhumei Foods released its 2024 interim results report.

Key points of investment

By optimizing store quality, the average store revenue contribution was basically stabilized. The company released the 2024 interim results report. The company achieved revenue of 3.34 billion yuan (-9.73% year over year), of which the total number of stores nationwide was 14,969 (net decrease of 1193 or -7.38% year on year), and an average single store contributed 0.2231 million yuan (-2.54% year over year). In mid-2024, gross margin was 30.29% (YoY +6.13pcts), net profit margin 8.51% (YoY +1.94pcts), and net profit to mother was 0.296 billion yuan (+22.20% YoY).

▌Year-over-year cost decline, gross margin recovery unleashes profit elasticity

The 2024 single quarter achieved revenue of 1.644 billion yuan (-12.35% YoY), gross profit margin of 30.55% (YoY +4.78pcts), net profit 7.59% (YoY +0.31pct), net profit to mother 0.131 billion yuan (YoY +25.08%), net profit of 0.125 billion yuan (YoY +36.63%). Weak demand has left stores under high pressure, and falling costs have boosted gross profit margins and unleashed performance elasticity.

Profit forecasting

We expect that after optimizing store quality, the company's operations are expected to return to the right track, and that single-store revenue can gradually improve in the future with the company's refined management and new product development and innovation capabilities. Due to weak terminal demand, we lowered our profit forecast for the next three years. We expect the company's EPS for 2024-2026 to be 1.00/1.19/1.41 yuan, respectively, and the current stock price corresponding to PE is 13/11/9 times, respectively, maintaining a “buy” investment rating.

Risk warning

Downward macroeconomic risks, the pandemic is dragging down consumption, costs falling short of expectations, and the pace of opening stores is falling short of expectations, etc.