23H1 revenue was in line with expectations, while profit was slightly lower than expected. Ausu 23H1 achieved revenue of approximately RMB 3.51 billion, a year-on-year decrease of 3.7%, and net profit to parent of 185 million yuan, a year-on-year decrease of 10.3%.
Goat milk powder gradually adjusted, and the bottom of milk powder stabilized. The revenue of 2023H1 milk powder/goat milk powder was 1,26/1.5 billion, respectively, +2.4%/-13.3% year-on-year. Milk powder's revenue for the full year of last year recorded a decline of 28.6%, so it stabilized on a low base; however, the goat milk powder business has entered an adjustment period, mainly because goat milk powder's revenue for the full year of last year still increased by 6.6%. In particular, 22H2 had double-digit growth, and channel inventory was high. Therefore, this year, the company adjusted the channel's higher inventory to control the pace of delivery, with a view to controlling inventory and stabilizing the price market. The gross margin of 2023H1 milk powder/goat milk powder was 53.3%/48.6%, respectively, and -2.1/-10.3 pct, respectively, from the previous year.
The gross margin of goat milk powder has dropped a lot, and its performance is weaker than milk powder, mainly due to intense competition in the industry and more promotions. However, goat milk powder is still the company's dominant product. The market share of Jabeite bucked the trend and expanded to 27.2%, +0.6 pcts over the previous year.
Expenses are well controlled, and investments are made rationally. The 2023H1 gross margine/sales expenses/management expenses ratios were 42.0%/27.4%/7.9%, respectively, compared to -5.6/-3.9/-0.2 pct. In a market environment where demand is weak and competition is fierce, the company rationally invests expenses, and the sales and management expenses ratio have declined a lot, hedging the adverse effects of declining gross margin. In 2Q23, the company merged Hypnocke and Capability Multi-Brand Division to enhance operational efficiency and effectively control expenses, and continuously improve cost utilization efficiency. At the same time, we are actively seeking collaboration with Erie in procurement, channels, etc., and drawing on operational experience.
Profit forecast and investment advice: Based on the level of intense competition exceeding expectations, we reduced our profit forecast. We expect the company's revenue for 23-25 to be 78.3/83.6/8.87 billion yuan (previous value was 88/98.8/10.89 billion yuan); net profit of 4.4/59/750 million yuan (previous value was 6.0/7.4/97 billion yuan); and EPS was 0.24/0.33/0.42 yuan (previous value was 0.33/0.41/0.54 yuan), respectively. Referring to the valuation of comparable companies, we gave the company 12xPE for 24 years (previous value 12xPE in 23 years), with a target price of HK$4.23 (1 HKD = 0.93 CNY, previous target price of HK$4.53), maintaining the “superior to market” rating.
Risk warning: The new population continues to be sluggish, new product promotion falls short of expectations, and competition in the industry is fierce.