Juewei Food (SH:603517) Huachuang Securities·2024-10-25 07:38Investment Rating - The report maintains a "Recommended" rating for the company with a target price of 19.6 CNY, compared to the current price of 17.94 CNY [1]. Core Views - The company reported a revenue of 5.02 billion CNY for the first three quarters of 2024, a year-on-year decrease of 10.9%, while the net profit attributable to shareholders was 440 million CNY, an increase of 12.5% year-on-year [1]. - In Q3 alone, the company achieved a revenue of 1.67 billion CNY, down 13.3% year-on-year, and a net profit of 140 million CNY, down 3.3% year-on-year, slightly below previous expectations [1]. - The company is focusing on optimizing its store structure and actively seeking changes to improve operational quality, which is expected to catalyze same-store performance improvements in the future [1]. Financial Summary - Total revenue for 2023 is projected at 7.261 billion CNY, with a year-on-year growth rate of 9.6%. However, for 2024, revenue is expected to decline by 10% to 6.538 billion CNY [2]. - The net profit attributable to shareholders is forecasted to be 344 million CNY for 2023, with a significant increase of 48.1% year-on-year, and is expected to rise to 539 million CNY in 2024, reflecting a growth rate of 56.5% [2]. - Earnings per share (EPS) is projected to be 0.56 CNY for 2023, increasing to 0.87 CNY in 2024, and further to 1.09 CNY in 2025 [2]. Operational Insights - The company has been closing stores, with a net closure of 981 stores expected by Q3 2024, which is seen as a necessary step to optimize operations and improve store quality [1]. - The gross profit margin for Q3 was reported at 31.1%, an increase of 5.3 percentage points year-on-year, indicating some cost improvements despite the revenue decline [1]. - The company is investing more in marketing and operational expenses to stimulate demand, which has led to an increase in the sales expense ratio to 9.7% [1]. Market Performance - The company's stock has experienced a significant decline of 62% over the past 12 months, compared to the performance of the CSI 300 index [4]. Valuation Metrics - The report adjusts the EPS forecast for 2024-2026 to 0.87 CNY, 1.09 CNY, and 1.19 CNY respectively, corresponding to price-to-earnings (PE) ratios of 21, 16, and 15 times [1][2]. - The target price of 19.6 CNY is based on an 18 times valuation for 2025, reflecting the historical average valuation center [1].