Event
On August 23, the company announced its mid-year report of 2022. 22H1, the company realized revenue of 5.632 billion yuan (+ 77.1%), net profit of 531 million yuan (+ 5.0%), adjusted net profit of 729 million yuan (+ 48.9%), and net profit of 508 million yuan (+ 2.2%).
The total number of dairy cows reached 380000, and the scale of raw milk income reached a new high. 1) the scale of raw milk income increased significantly, and the average price was still higher than that of the market. 22H1's raw milk business achieved an income of 4.858 billion yuan (+ 52.8%); raw milk production / sales were 1.152 million tons (+ 56.9%) / 1.135 million tons (+ 56.7%) respectively. Excluding the impact of acquisition, raw milk production was + 12.8% compared with the same period last year. The average selling price of raw milk is 4.28yuan / kg (- 2.5%), which is higher than the average market price of raw milk (4.19yuan / kg).
2) the total number of dairy cows reached 380000, and the milk production efficiency increased steadily. As of 22H1, the company has a total of 38 farms, with a total of 382700 cows, which is + 51.9% compared with the same period last year, mainly due to 21H2's acquisition of 100% equity in Zhongyuan and Fuyuan, and is steadily moving towards the goal of "500000 cows in 2025 with an annual output of 3.6 million tons of fresh milk." 22H1, in the company's dairy herd, the number of adult dairy cattle reached 196300, accounting for 51.3%, and the annual yield of adult dairy cattle was 12.3 tons (+ 10.8%).
3) increase the income of feed business. In November, 21, the company acquired 100% equity in Fuyuan, and the industrial chain extended to the upstream feed; 22H1, the company's feed business achieved an income of 774 million yuan and a gross profit margin of 11.7%.
Gross profit margin of raw milk business dropped slightly
1) the gross profit margin of raw milk business decreased slightly, and the expense rate increased slightly during the period. 22H1, the gross profit margin of the company's raw milk business is 32.2% (- 5.0pct), which is mainly due to the slight decrease in the price of raw milk and the high feed cost; the sales / management / financial expense rates are 2.9%, 5.7% and 2.7%, respectively, compared with the same period last year + 0.4/+0.8/-0.1pct.
2) the adjusted net interest rate decreased slightly. 22H1, the company's net interest rate is 9.4% (- 6.5pct), excluding foreign exchange and derivative financial instruments profit and loss impact of about 200 million yuan, the adjusted net interest rate is 12.9% (- 2.5pct).
Investment suggestion
The company is one of the top two raw milk, deeply bound to Mengniu, with strong certainty of scale expansion, upgrading of dairy consumption and improvement of raw milk self-sufficiency rate, it is expected to continue to benefit. We estimate that the company's net profit in 2022, 2023, and 2024 will be 12.08, 14.70, 1.803 million yuan, respectively, an increase of 19%, 22%, 23%, corresponding to the 6-5-4 times of PE (market capitalization 7.1 billion yuan) on August 23, maintaining a "buy" rating.
Risk hint
Downside risk of raw milk price, rising risk of upstream feed price, systemic risk.