Event: The company announced the latest operating conditions for the first three quarters of 2023
Revenue for the first three quarters was 13.43 billion yuan, up 26.4% year on year. The year-on-year increase in net profit in the first three quarters was in line with the level of revenue growth. Net cash flow from operating activities for the first three quarters was $26.9 million, compared with net outflow for the same period last year. The revenue contribution of the company's six core products in the first three quarters was 6.525 billion yuan, an increase of 30.6% over the previous year. It was the main driving force of the company's revenue growth. Among them, grape sales increased by about 126% year on year and durian increased by about 26% year on year. Revenue from non-core products increased by more than 20% year-on-year in the first three quarters.
The company's Q3 revenue and profit growth was very steady. Cash flow was a performance highlight. The company's revenue growth in the third quarter showed an accelerating trend (26.4% in the first three quarters and 19.37% in the first half of the year). At the same time, the company's cash flow changed from net outflow to net inflow, indicating that the company has gone through the bottom of the fundamental cycle and entered a new stage of healthy development. On the product side, the company's core product matrix effect has gradually strengthened, and more single-product level business growth curves have been reserved. Together with “all grades, all categories, and all regions” supply capabilities, it has increased the dependence of downstream customers on the company. Channel-side companies explore the e-commerce field, dig deeper into downstream store traffic resources and brand marketing activities, form “online and offline” mutual drainage, and extend the “end-to-end” model to C-end customer groups in an “asset-light, low cost” manner. In terms of credit management, the company actively adjusted its credit management implementation policy for downstream customers in 2023. Through in-depth analysis of customers one by one, the company gradually tightened credit limits for specific downstream customers, increased credit review processes, enhanced debt collection efforts, actively expanded new customers to spread credit risk, and carried out business empowerment according to the specific circumstances of different customers to achieve accelerated recovery of long-time accounts receivable. The company uses cash flow indicators to guide channel development strategies, and increases the sales share of “short account period” channels and “short account period” customers in an orderly manner.
Profit Forecasts, Valuations, and Ratings
We maintained the company's revenue forecast for 2023-2025 at 180.97/217.16/26.059 billion yuan, with a year-on-year growth rate of 20%/20%/20%, a 3-year CAGR of 20%, a 3-year CAGR of 20%, a net profit of 1,594/18.57/2,560 billion yuan, a year-on-year growth rate of 9.78%/16.51%/37.84%, EPS of 1.13/1.31/1.81 per share, and a 3-year CAGR of 20.29%. The average PE of a comparable company in 2024 was 11.87 times. Given the steady growth in the company's income statement, the gradual recovery of the cash flow statement, and the healthy development trend of the balance sheet, we maintained the company's PE of 6 times in 2024, with a target price of 8.59HKD, corresponding to the HKD exchange rate of 0.9159, and maintained a “buy” rating.
Risk warning: 1. Risk of fluctuations in downstream demand; 2. Increased risk of competition; 3. Risk of impairment of accounts receivable; 4. Risk of selecting comparable companies across markets for valuation comparison; 5. Risk of lifting the ban on first-level market shareholders