Event: Jia Biyou announced its semi-annual report for 2023. At 23H1, the company achieved operating income of 199 million yuan, +16.13%; net profit of 34.85 million yuan, or -30.34% of the same period; net profit of non-return net profit of 22.79 million yuan, or -36.50% year-on-year. Among them, 23Q2 achieved operating income of 111 million yuan, +16.10% year-on-year, net profit of 20.54 million yuan, or 23.36% of the same period; net profit of non-attributable income of 15.49 million yuan, -29.14% year-on-year.
Comment:
Q2 Revenue was in line with expectations, and overseas orders began to recover month-on-month. In terms of customer structure, in addition to the increase in orders from major domestic customers brought about by the new national standard in Q2, orders from overseas customers showed a certain degree of month-on-month increase compared to Q1, driving a month-on-month increase on the company's revenue side. By product, at 23H1, the company's DHA growth rate reached 80%; SA also achieved an increase of over 20%. Affected by the progress of overseas customer infant formula registration, the share of the company's 23H1 overseas revenue fell to 31% from 48% in the same period last year.
Q2 Gross margin improved month-on-month, and profit began to recover month-on-month. Affected by the month-on-month increase in the volume of goods picked up by high-margin overseas customers, the company's Q2 gross margin reached 43.2%, +4.8 pct month-on-month, and -0.7 pct year-on-year. On the cost side, the company's Q2 sales expense rate/management expense rate/R&D expense rate/financial expense ratio were 5.7%/8.9%/9.3%/-3.0% respectively, year-on-year -0.5pct/-0.9pct/+0.4pct/6.9pct, month-on-month -1.5pct/-0.7pct/-4.9 pct, Q2 operating profit margin reached 16.3%, recovering 3.7 pct month-on-month, 11.1pct, year-on-year, so that the net profit ratio for homologation began to recover somewhat.
Business performance is excellent, and the customer structure is expected to improve in the second half of the year. By product, in the first half of the year, the company's sales volume for major domestic clients increased markedly. Feihe's sales volume increased 80% year on year, and Yili's sales volume increased 60% year on year. SA became an additive to L'Oréal's Yuanishi Gilt series products, further opening up space for the company's cosmetics business. In the first half of the year, the company continued to invest in R&D expenses, carry out research and development of a full range of HMO products, and prepare for providing customers with a full range of HMO solutions in the future. Furthermore, the new powder production line has also been certified by important domestic customers, and production capacity is expected to be gradually released in the future. Currently, there are close to 800 new national standard registrations, and the approval process is quite adequate. Overseas infant formula manufacturers that were not previously registered have received approval one after another. It is expected that the company's customer structure will continue to improve in the second half of the year, and performance is expected to recover.
Profit forecasting and investment ratings: The dawn of reversal is here, focus on investment opportunities. Since this year, the company has been continuously affected by adverse events, including previous overseas investment losses and 23Q1 performance falling short of expectations. Overall Q2 results were in line with our expectations, while gross margin showed a significant month-on-month improvement. Looking ahead to the second half of the year, we believe the company is expected to usher in a turning point under the opportunity of orders from high-profit overseas customers and the gradual release of new powder production capacity, and its performance is expected to continue to recover. We believe the company is expected to achieve this year's performance guidelines. It is estimated that the company's EPS for 2023-2025 will be 0.60/0.82/1.01 yuan, corresponding to 36X, 26X, and 21XPE in 2023-2025, respectively, and maintain the company's “buy” rating.
Risk factors: customer orders fall short of expectations, product price reduction exceeds expectations