Overview of events

The company released the three-quarter report in 2023, 2023Q1-3 achieved revenue of 986 million yuan, year-on-year-13.55%, net profit of 87 million yuan, year-on-year-31.08%, deducted non-return net profit of 84 million yuan, year-on-year-10.57% In a single quarter, 23Q3 achieved revenue of 358 million yuan, year-on-year-12.64%, net profit of 42 million yuan, year-on-year-31.01%, deduction of non-return net profit of 41 million yuan, year-on-year-9.46%. The decline in Q3 revenue and profits compared with the same period last year is expected to be due to the destocking of major customers and the impact of a high base in the same period last year. The decline in net profit is much lower than that of deducting non-large trading financial assets and changes in the fair value of foreign exchange contracts. In terms of cash flow, the net cash flow generated by operating activities was 167 million yuan, + 151.90% compared with the same period last year, mainly due to the increase in cash received from the sale of goods during the reporting period compared with the same period last year.

Analysis and judgment:

Q3 revenue is under short-term pressure, and gross profit margin is significantly higher than the same period last year.

Q3 achieved revenue of 358 million yuan in a single quarter,-12.64% compared with the same period last year. We expect it to be due to the impact of a high base and a long inventory removal cycle for key customers in the same period last year, but with the approach of the peak sales season of Q4 and the end of customer inventory elimination, orders are expected to resume rapid growth. In terms of profitability, 2023Q1-3 company gross profit margin 16.44%, year-on-year + 3.27pct, company net profit rate 8.86%, year-on-year-2.25pct; of which Q3 single-quarter gross profit margin is 21.86%, 11.86%, year-on-year + 6.61pct,-3.16pct. Our analysis of the increase in gross profit margin is driven by the decline in raw material prices and the superimposed R & D of new products, and the decline in net profit rate is due to a greater increase in expense rate during the period. In terms of period expenses, the period expense rate of 2023Q1-3 is 4.39%, year-on-year + 2.80pct, in which the sales / management / R & D / financial expense rate is 1.86%, 2.90%, 1.77%, 2.13%, respectively, + 0.67/+0.28/+0.48/+1.37pct.

Q3 the company period expense rate in a single quarter is 5.82%, year-on-year + 5.98pct, in which the sales / management / R & D / financial expense rate is 1.92%, 2.68%, 1.55%, 0.34%, respectively, + 0.73/-0.30/+0.28/+5.25pct. The increase in the rate of financial expenses in the first three quarters is due to a decrease in exchange gains from exchange rate changes compared with the same period.

Release the announcement of the profit distribution plan for the first three quarters, actively return to shareholders the announcement on the profit distribution plan for the first three quarters of 2023 on October 27, 2023, the consolidated statement of the company realized a net profit of 87 million yuan in the first three quarters of 2023, and the cumulative net profit of the parent company was 86 million yuan. as of September 30, the consolidated statement of the company can distribute profits to investors of 460 million yuan. The profit available to investors from the parent company is 379 million yuan. The company intends to distribute a cash dividend of 2.50 yuan (including tax) to all shareholders on the basis of the total share capital of the company on the equity registration date minus the share capital of the company's repurchase of shares in the special account at the time of the implementation of this equity distribution, and will not increase the share capital with the provident fund. The cash dividend comes from its own funds, and a total of 46 million of the cash dividend is expected to be distributed. The profit distribution plan is conducive to safeguarding the interests of shareholders and promoting the normal operation and long-term development of the company's business.

Investment advice:

We believe that the pet industry is still in the stage of rising prosperity, and the company, as the leader of domestic health care products, is expected to fully benefit the pet economic dividend. Rely on their own channels, customers, product research and development, large-scale production and other comprehensive advantages to continue to expand new customers, existing customer order growth and new customers continue to release, at the same time, accompanied by the landing of their own investment projects, new production capacity have been put into production, self-owned brand building, future growth is expected. Taking into account the long inventory removal cycle of major customers and the imposition of tariffs, we adjusted our previous profit forecast that the company's 23-25-year revenue was adjusted from 15.55,18.22 and 2.135 billion yuan to 14.17,17.01 and 2.042 billion yuan respectively. In 23-25, the EPS was adjusted from 0.84,0.99,1.16 yuan to 0.70,0.84,1.01 yuan respectively. According to the closing price of 15.2 yuan per share on October 27, 2023, the corresponding PE was 22 times, 18 times and 15 times respectively, maintaining the "buy" rating.

Risk Tips:

1) the risk of rising raw material costs, 2) the risk of exchange rate fluctuation, 3) the risk of the impact of COVID-19 epidemic, 4) the risk of intensified competition in the industry, 5) the development of new customers is not as expected, and the sea freight fluctuates.