Fuling Zhacai(SZ:002507) Southwest Securities·2024-04-29 11:30Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected relative performance increase of over 20% compared to the benchmark index in the next six months [1][3]. Core Views - The company experienced a slight revenue decline of 1.5% year-on-year in Q1 2024, with total revenue reaching 750 million yuan. This decline is attributed to a high base from the previous year and a slow recovery in overall consumer demand [2][11]. - Despite the revenue pressure, the net profit margin improved, with a net profit of 270 million yuan in Q1 2024, reflecting a year-on-year increase of 4.1% [11]. - The company is focusing on expanding its product categories and distribution channels, particularly through its "dual expansion strategy" which emphasizes both market and product category growth [12]. Summary by Sections Financial Performance - Q1 2024 revenue was 750 million yuan, down 1.5% year-on-year, while net profit was 270 million yuan, up 4.1% year-on-year. The gross margin was 52.1%, down 4.2 percentage points year-on-year due to high raw material costs [2][11]. - The company expects net profits for 2024 to be 921.94 million yuan, with an EPS of 0.80 yuan, reflecting a dynamic PE of 16 times [3][13]. Strategic Initiatives - The company is implementing a dual expansion strategy focusing on the development of new products, particularly the pickled vegetable sauce, and enhancing distribution in lower-tier markets [12]. - Marketing efforts will combine health-oriented messaging with brand promotion to strengthen market presence and brand recognition [12]. Future Outlook - The company anticipates a recovery in profit margins as raw material prices stabilize, with expectations for a significant improvement in profitability in the second half of 2024 [12].