Incident: **** Dairy released its 2023 annual report. 2023H1 achieved revenue of 14.139 billion yuan, a year-on-year decrease of 1.88%, and net profit of Gimu was 338 million yuan, an increase of 20.07% over the previous year. Among them, 2023Q2 achieved revenue of 7.068 billion yuan in a single quarter, a year-on-year decrease of 1.34%, and net profit for the parent group was 151 million yuan, an increase of 30.14% over the previous year.
The liquid milk category is growing steadily, and the trend in Shanghai is improving. By product: 2023Q2 liquid milk/other dairy products/animal husbandry products achieved revenue of 39.29/20.37/577 billion yuan respectively, +5.24%/-9.80%/-23.55% over the same period. Among them, liquid milk revenue growth was relatively steady. In the first half of the year, the company steadily promoted product iterative innovation and launched “Changyou0 Burden? 30 new products, including the “Flavored Fermented Milk Series” and “Premium Organic Fresh Milk”. By region: 2023Q2 Shanghai/ foreign/ overseas revenue was 20.27/30.95/110 billion yuan respectively, compared with +11.08%/-2.77%/-8.93%. Among them, the overseas business, Xinleite focused on adjusting inventory levels and optimizing the product portfolio. Overall performance was relatively stable. 2023H1 achieved revenue of 3,766 million yuan, +0.44% year-on-year; net profit was 85 million yuan, down 33.86% year on year. By channel: 2023Q2 direct marketing/distribution/other channel revenue was 16.36/53.40/47 billion yuan, respectively, -5.90%/+0.15%/+92.55%. By the end of the half-year of 2023, the company had a total of 4,025 dealers, including 446 Shanghai dealers, a net increase of 8 2023Q2; 3,579 overseas dealers, a net increase of 104 in 2023Q2, and the construction of a distribution network for the foreign port market continued to advance.
The decline in raw milk prices has boosted gross profit margins, and profit levels have increased. On the gross margin side, 2023H1/23Q2 gross margin was 20.12%/20.28%, 23Q2 was +1.86 pcts year on year, and +0.32 pcts month on month. The main reason is that the price of raw milk is in a downward channel, raising the overall gross margin level. On the cost rate side, the sales expense ratio for 2023H1/23Q2 was 12.16%/12.55%, 23Q2 was +1.51 pcts year on year, and +0.77 pcts month on month. The main reason is that the company's advertising and marketing expenses have increased, reached young people through various brand activities, and enhanced brand vitality. 23Q2 gross sales margin was 7.74%, +0.35 Pct year on year. The management fee rate for 2023H1/23Q2 was 3.37%/3.51%, 23q2 was +0.71 pcts year on year, and +0.29 pcts month on month. Overall, the net interest rate for 2023H1/23Q2 was 2.39%/2.13%, 23Q2 was +0.52pcts year on year, and -0.52pcts month on month. Furthermore, the company continues to promote the construction of the upstream animal husbandry industry. 23H1 has completed the construction of projects in Zhongwei in Ningxia, Funan in Anhui, Huaibei in Anhui, Hachuan Phase II, and Jinshan. **** Animal Husbandry's many indicators, such as the health level of cows, fresh milk quality, and cow yield, have reached the best level in history.
Profit forecast, valuation and rating: Considering the steady increase in the company's profitability, net profit for 2023-2025 was raised to 671/778/919 million yuan (up 2.72%/6.74%/7.53% from the previous time). The EPS corresponding to 2023-2025 is 0.49/0.56/0.67 yuan, and the P/E corresponding to the current stock price is 21/19/16 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: Competition in the industry has intensified, the price of raw milk has risen more than expected, and food safety issues.