1H23 performance is lower than we expected.
Yuanfei Pet announced 1H23 results: income 431 million yuan, year-on-year-21.4%; return to the mother net profit of 66 million yuan, year-on-year-35.6%, the performance was lower than we expected, mainly due to the slow recovery of downstream demand for pet products. On a quarterly basis, the Q1/Q2 income is RMB 188 million, which is-46.2% and 22.3% respectively compared with the same period last year. The net profit of the parent is RMB 0.21 million, which is higher than that of Q1. The performance of Q2 is better than that of Q1.
Trend of development
1. Pet food business is growing well, which helps the company's 2Q23 revenue increase compared with the same period last year. 1H23 achieved revenue of 431 million yuan,-21.4% year-on-year; of which 2Q23 income was 243 million yuan, + 22.3% year-on-year, of which the pet food business achieved good growth, while the consumer demand for pet products recovered slowly, and the company's income was under pressure. ① pet traction toys: 1H23 income 182 million yuan, year-on-year-41.2%; gross profit margin 33.5%, year-on-year + 1.1 ppt; ② pet snacks: 1H23 income 204 million yuan, year-on-year + 9.2%; gross profit margin 12.8%, year-on-year-1.6ppt Other ③ businesses: 1H23 injection toys / other pet products and other income is 659 million yuan, which is-18.69% and 32.5% respectively compared with the same period last year, and the income from pet staple food has increased significantly to 8.47 million yuan. From a regional point of view, the overseas / domestic income of 1H23 is RMB 403. 027 million yuan, which is 71.1% compared with the same period last year.
2. Profitability is under pressure. 1H23 company gross profit margin year-on-year-3.7ppt to 22.1%, of which pet traction equipment / pet snacks gross profit margin year-on-year + 1.1ppt; sales expense rate + 0.9ppt to 2.4%; management expense rate + 0.9ppt to 3.7%; R & D expenditure rate + 0.2ppt to 2.3% The financial expense rate is from-2.7ppt to-5.7% compared with the same period last year, mainly due to the increase in interest income and the exchange rate gains and losses brought about by exchange rate fluctuations are similar to those in the same period last year. The final 1H23 net interest rate is-3.4ppt to 15.3% year-on-year.
3. Pay attention to the demand repair of pet products and the improvement trend of company orders. In the short term, the export of pet snacks in the company has shown an improving trend, and the demand repair of pet products is still in progress. In the medium and long term, on the production side, we expect that the company's IPO investment project is expected to alleviate the capacity bottleneck, and the completion of the intelligent warehousing and logistics center is expected to reduce costs and increase efficiency; on the client side, the company will dig deep into existing customers to increase their share, while actively developing new customers, which is expected to contribute to the increase.
Profit forecast and valuation
Taking into account the slower-than-expected repair of overseas demand, the net profit forecast of 2023Universe 2024 was lowered by 20% of the net profit forecast by 23% to 1.45 trillion. The current share price corresponds to 2023 Universe 15x 2024 17xPUnix E. To maintain the industry rating of outperforming, based on the adjustment of profit forecast, the original target price corresponds to the target price of 20.1 yuan after the increase, and the target price is reduced by 20% to 16.5 yuan after the right is reduced. It corresponds to 2023 Universe, which is 22-19 times Pmax E in 2024, with 26% upside space.
Risk
The rising price of raw materials, the risk of tariff increase, the risk of core customer loss, the risk of exchange rate fluctuations.