occurrences
Company announcement 2023 mid-year report. At 2023H1, the company achieved total revenue of 14.139 billion yuan (-1.88%), net profit of 338 million yuan (+20.07%), net profit of non-attributable income of 317 million yuan (+31.03%). In 23Q2, the company achieved total revenue of 7.068 billion yuan (-1.34%), net profit of 151 million yuan (+30.14%) after deducting non-attributable net profit of 142 million yuan (+39.00%).
Liquid milk is growing steadily, and the number of distributors has returned to positive growth in Q2 1) Liquid milk is growing steadily. 23H1, the company's liquid milk/other dairy products/animal husbandry products/other revenue was 80.05/41.89/10.53/810 million yuan, compared to +3.11%/-5.10%/-27.21%/+26.37%, 23Q2 revenue was 39.34/20.37/5.77/477 billion yuan, respectively, +5.35%/-9.80%/-23.55%/+36.38%.
2) Revenue in Shanghai increased 11% in Q2. 23H1. The company's Shanghai/overseas/overseas revenue was 39.76/63.18/3,762 billion yuan, year-on-year, +1.72%/-4.53%/+0.64%, 23Q2 revenue was 20.27/30.95/190 billion yuan, respectively, +11.08%/-2.77%/-8.93%. The Shanghai region was mainly affected by the low base of 22Q2. The growth rate of the three regions was -0.00%/-14.35%/+25.50%, respectively.
3) Distribution channels are stable, and the decline in direct sales channels Q2 has narrowed. At 23H1, the company's direct operation/distribution/other revenue was 32.76/106.83/97 billion yuan, year-on-year, -7.36%/+0.30%/+25.56%, 23Q2 revenue was 1,636/53.40/47 billion yuan, respectively, -5.90%/+0.15%/+92.55%.
4) New Light's net interest rate for the first half of the year was 2.25%. 23H1, Xinlite achieved revenue of 3,766 billion yuan (+0.44%) and net profit of 85 million yuan (-33.86%). The decline in net profit was mainly affected by rising raw material prices and the depreciation of RMB.
5) The number of dealers resumed positive growth in Q2. At the end of 23H1, the number of dealers in Shanghai/overseas of the company was 466/3579, respectively, a decrease of 10/24 from the beginning of the year, with a net increase of 8/104 in Q2.
Raw milk prices have declined, and gross margin has entered a cycle of improvement
1) The price of raw milk has declined, and gross margin has entered a cycle of improvement. At 23H1, the company's gross margin was 20.12% (+1.01pct), the gross margin was 2.39% (+0.44pct); 23Q2, the company's gross margin was 20.28% (+1.86pct), and the gross margin rate was 2.13% (+0.52 pct). The increase in gross margin mainly benefited from the fall in raw milk prices.
2) Management and finance cost rates increased year over year. 23H1, the company's sales/management/R&D/financial expense ratio was 12.16%/3.37%/0.28%/0.77%, respectively, -0.02/+0.65/+0.05/+0.27 pct; 23Q2 sales/management/R&D/financial expense ratio was +1.51/+0.71/+0.05/+0.28 pct, respectively, and the sales expense ratio was +0.77 pct.
Innovation leads and continues to promote digital transformation
1) Innovation leads, improving quality and efficiency. 23H1. The company strengthened innovation, successfully developed and launched 30 new products, and completed the registration of the new national standard for the three series of **** Milk Powder and was successfully listed. At the same time, the company has collaborated with various departments through research institutes to carry out more than 40 technical support projects, and has taken many measures to improve quality and efficiency.
2) Continuously promote digital transformation. 23H1, the company's financial digitization project accelerated, and multiple factories and marketing centers completed the system launch to achieve multi-process digitalization and integrated management; opening up the entire upstream and downstream industry chain business for customers and suppliers. **** Dairy's smart factories for the entire dairy industry chain were listed in the “List of 10 Benchmark Smart Factories in Shanghai” announced by the Shanghai Economic and Information Technology Commission.
Investment advice
The company is one of the leading domestic dairy companies, and the moats in Shanghai and East China are stable. We expect the company's net profit to be 658/7.48/868 million yuan respectively in 2023-2025, with a growth rate of 82.35%/13.69%/16.09%. Corresponding to August 30, PE will be 22/19/17X (market value of 14.4 billion yuan), respectively, maintaining a “buy” rating.
Risk warning
Food safety risks, risk of fluctuations in raw milk prices, risk of policy adjustments.