The share continues to increase, maintaining the “increase in holdings” rating
China Feihe released its 2022 annual report, achieving revenue of 21.31 billion yuan in 2022, a year-on-year decrease of 6.4%; Guimu achieved net profit of 4.942 billion yuan, a year-on-year decrease of 28.1%. Due to the increase in the share of the company's low gross margin products, changes in the product structure put slight pressure on gross margin. We lowered the 2023-2024 profit forecast. The estimated net profit for 2023-2024 is 55.0 billion yuan and 5.93 billion yuan (the previous time was 6.74 billion yuan and 7.72 billion yuan), and added the 2025 profit forecast of 6.44 billion yuan. EPS is 0.72, 0.81, 0.83 yuan respectively, and the current stock price corresponds to PE 6.6, 5.9, 5.7 times. China Feihe is a pioneer in the infant formula market in China. Its market share continues to increase, and its brand and channel advantages are stable. Looking at the long term, the company actively lays out a second growth curve, has broad scope for development, and maintains an “increase in holdings” investment rating.
Channel adjustments and declining birth rates have led to a decline in revenue
The company's revenue in 2022 fell 6.4% year on year, mainly due to: (1) the company actively adjusted channel inventory through fresh strategies; (2) the birth rate declined. By product, infant formula and other dairy products were -7.4% and 16.4% year-on-year in 2022.
As of December 31, 2022, China Feihe held about 1 million face-to-face seminars, received more than 3 million new visitors, continued to invest in brand building, and continued to improve the company's brand strength. In terms of channels, the company has covered about 94,000 retail outlets through more than 2,700 offline customers, and the channel advantage is stable. At present, the company's channel inventory is in normal inventory multiples, and the market share continues to increase. Looking ahead to 2023, with the release of new products, revenue is expected to grow steadily under a low base.
The decline in net interest rates was mainly due to a decrease in gross margin and an increase in sales rates
The company's net interest rate fell 7.1 pct year over year to 23.2% in 2022. Gross margin fell 4.8pct to 65.5% in 2022, mainly due to (1) rising raw material costs; (2) changes in product structure, where Zhuo Rui's gross margin was relatively low, affecting the gross margin level. Sales expenses increased 1.2 pct to 30.7% year over year in 2022, mainly due to declining revenue. Looking ahead to 2023, as the proportion of new products with relatively low gross margins increases, the product structure changes, and offline gross margins are still slightly pressured; promotional expenses are reduced, and as revenue growth resumes, scale effects are evident, and annual rates are expected to decline steadily and slightly as cost usage efficiency improves, net profit is expected to grow steadily in 2023.
Risk warning: risk of macroeconomic fluctuations, risk of market expansion falling short of expectations, risk of fluctuations in raw material prices, etc.