Event: In the first three quarters of 2023, Arowana realized operating income of 188.52 billion yuan,+0.4% year-on-year; net profit attributable to parent was 2.13 billion yuan,-9.5% year-on-year; net profit deducted from non-profit was 910 million yuan,-59.75% year-on-year.
Among them, in the third quarter, the company's operating income was 69.81 billion yuan,+2.1% year-on-year; the net profit attributable to the parent company was 1.16 billion yuan,+208.4% year-on-year; the net profit deducted from non-profit was 895 million yuan, from negative to positive year-on-year.
The kitchen food and catering channel continued to recover, and the profit of retail channel increased year-on-year. With the recovery of the domestic market, the sales volume of Q1-3 Company's catering and food industry channels increased significantly year-on-year; the retail channels benefited from the decline in raw material prices, and the gross profit margin and profit increased year-on-year. Overall, due to the increase in the proportion of sales volume of catering channels, the kitchen food profit of Q1-3 Company declined year-on-year. In the first half of the year, the flour business, which was dragged down by high-priced raw material inventory, Q3 realized the same increase in profit as the raw material inventory cost dropped to normal level.
Q3 Soybean squeeze profit picked up, feed raw material business profit increased significantly year-on-year. Q3 Due to tight soybean supply and strong downstream feed demand, the domestic soybean meal price rebounded sharply, while the US soybean fluctuated weakly under the expectation of high yield in South America. The domestic soybean profit recovered obviously compared with the previous month, driving the profit of feed raw materials business of the Company to increase significantly year-on-year. In addition, with the rebound in oil prices, the company's oil technology products increased sharply.
Q3 Company profitability improved year-on-year. Q3 Company's investment income was RMB 240 million yuan (year-on-year + RMB 50 million yuan), and the profit and loss of fair value change was RMB 100 million yuan (year-on-year--375 million yuan). Affected by the boost of feed raw materials and oil technology business, Q3 Company's gross profit margin on sales was 5.75%(year-on-year +2.72pct, month-on-month +2.64pct), net profit margin on sales was 1.84%(year-on-year +1.41pct, month-on-month +1.79pct), and profitability was improved with month-on-month comparison.
Investment suggestion: The company has deep brand, channel and cost barriers. In recent years, it has continuously expanded new categories and invested heavily in central kitchen business. It is expected to grow from a grain and oil giant to a comprehensive food producer in the future. In the short term, with the downward movement of raw material cost center and the recovery of catering channel, the profitability of retail channel and total market share of the Company are expected to further increase. We adjusted our earnings forecast and estimated that the EPS of the Company from 2023 to 2025 will be 0.55 yuan, 0.78 yuan and 1.03 yuan respectively. Based on the closing price on October 30,2023, the corresponding PE will be 62.3 times, 44.3 times and 33.7 times, maintaining the "overweight" rating.
Risk tips: sharp fluctuations in agricultural prices, derivatives trading risk, exchange rate risk, food safety risk, policy change, natural disasters.