Event
On October 24, 2023, Tianrun Dairy released the third quarter report of 2023.
Main points of investment
The performance is in line with expectations, and the new rural consolidation table is a drag on profits.
The total revenue of 2023Q1-Q3 is 2.083 billion yuan (up 12%), and the net profit is 143 million yuan (7%), of which 2023Q3 revenue is 694 million yuan (up 12%) and net profit is 17 million yuan (64%). The short-term pressure on profits is due to the decline in the price of eliminated cattle in the market and the drag on the new farmers' dairy industry. At the profit end, 2023Q1-Q3 gross margin 19.58% (+ 2pct), net profit 6.99% (- 2pct); 2023Q3 gross margin 17.62% (+ 0.01pct), net profit 2.15% (- 6pct). On the expense side, the 2023Q3 sales expense rate is 5.68% (- 0.4pct), the management expense rate is 3.62% (+ 0.4pct), and the proportion of business tax and surcharge is 0.43% (- 0.1pct). On the cash flow side, the net cash flow of 2023Q1-Q3 operating activities is 38 million yuan (with a decrease of 68%), and the net cash flow of 2023Q3 operating activities is-62 million yuan (2022Q3 is-31 million yuan), which is due to the increase in the purchase of raw materials. As of the end of 2023Q3, the contract debt was 52 million yuan (month-on-month + 17%).
The category at room temperature is eye-catching, and the market outside Xinjiang is expanding steadily.
From a product point of view, the revenue of 2023Q3 room temperature dairy products / low temperature dairy products / animal husbandry products / other products is 3.9pm 2.68pm 0.02 million yuan, compared with the same period last year, + 104% Universe 16% Universe 3% Picture 83%. The growth rate of room temperature dairy products is bright, including Tetra Pak brick products growing well, and barreled yoghurt in cryogenic products increased slightly. In terms of new products, the company will speed up the development and promotion of new products this year. 2023H1 will launch a total of 16 new products. The company will focus on promoting seabuckthorn milk beer and Tianrun organic pure milk. From the perspective of different channels, the revenue of 2023Q3 distribution / direct sales was 6170.71 million yuan respectively, an increase of 47% and 65% respectively. From a sub-regional point of view, the revenue of 2023Q3 in / outside Xinjiang is 363,325 million yuan, an increase of 27% and 83%, and the region outside Xinjiang is expanding steadily. By the end of 2023Q3, the total number of dealers was 878, with a net increase of 152. In terms of specialty stores, the company will make use of the high viscosity customer base of specialty stores to vigorously promote the business of middle-aged and elderly milk powder in the future. at present, it has a product reserve and has been set up in suitable areas. In terms of raw milk, after the merger of Xinnong Dairy, the company's raw milk self-sufficiency rate is expected to further improve, while filling the milk powder business to help focus on middle-aged and elderly milk powder.
Profit forecast
We see that the company's leading position in the domestic market of dairy products is consolidated, and the expansion outside the territory is continuing, and the impact of the new agricultural merger is expected to be gradually weakened. According to the three quarterly reports, we adjusted the EPS for 2023-2025 to 0.62, 0.84, and 1.03 (the previous value is 0.80, 0.96, 1.15, respectively), and the current share price corresponds to PE, respectively, at 20-15-12, maintaining the "buy" investment rating.
Risk hint
Macroeconomic downside risks, raw material rising risks, lower-than-expected growth of low-temperature products, further intensified competition, and so on.