Incidents:
On January 23, '24, the company announced its 23-year performance forecast. It is expected to achieve net profit of 101 million yuan to 110 million yuan (+89.1% to 106% year over year) for the full year, and corresponding estimates of net profit to mother of 19 million yuan to 0.28 million yuan (+42.5% to 109.1% year over year) in the 23Q4 single quarter. Net profit without return to mother is expected to be achieved for the full year of 83 million yuan to 93 million yuan (+84.8% to 107.1% year over year), and corresponding estimates suggest that net profit without return to mother will be 12 million yuan to 0.2 billion yuan (-5.8% to +75.6% year over year) in the 23Q4 single quarter.
Investment summary:
Volume and price are expected to rise rapidly, costs will fall, and gross profit will grow faster than revenue. In 23 years, the company has continued to implement development strategies and business plans, actively develop new customers and new channels, and achieve continuous and steady business growth. We expect the company's annual revenue to increase by nearly 20% year-on-year, with volume and price growth rates of around 10%. The company's core business - the cost of concentrated dairy products is mainly affected by the price of raw materials such as milk powder and white sugar. Although sugar prices have been rising in 23 years, the price of milk powder has declined significantly year over year, which is expected to significantly reduce the company's unit cost (mainly due to the larger unit usage of milk powder, higher unit price, and greater price fluctuations). Based on this, we predict that the company's gross margin for concentrated dairy products may increase by about 5 percentage points in 23 years. Benefiting from this, the company's gross profit growth is expected to be significantly higher than the revenue growth rate.
Expenses were well controlled during the period, further increasing the level of profit margins. In recent years, the company's revenue scale has continued to grow, but the cost growth rate during the period was not obvious, and the cost ratio showed a significant downward trend during the period. We expect the cost rate for the company's sales, management, and R&D projects in 23 to be slightly lower than in '22. As a result, the growth rate of the company's net profit to mother is expected to be significantly higher than the revenue growth rate.
23Q4 achieved relatively rapid growth in a single quarter, better than most of the same period in recent years. We expect the company to achieve net profit of 104 million yuan for the full year of '23, corresponding to a single quarter of 23Q4, achieving a net profit of $22 million (+64.3% year over year). Compared with the same period in history, the company's net profit growth rates for each period were 22Q4 (-20.7%), 21Q4 (-60.7%), 20Q4 (+63.2%), and 19Q4 (-15.5%), respectively. We expect the company to achieve strong performance growth in 23Q4, even during a period of relatively weak consumer confidence.
24 After the Spring Festival, the full year results are still worth looking forward to. Due to the late Spring Festival in 2024, the preparation of New Year's goods was mostly concentrated in January '24, so strong growth in 23Q4 should not overshadow 24-year results. Looking at history, the company usually accounts for a slightly higher share of Q4 revenue throughout the year, but the overall distribution of each quarter is uniform, with no significant weak peak season. We're still looking forward to the company's 24-year results.
Investment advice: We expect the company's revenue for 2023-2025 to be 1.06 billion yuan, 1.2 billion yuan and 1.39 billion yuan, respectively, corresponding year-on-year increases of 18.5%, 13.7%, and 15.7% year-on-year net profit of 104 million yuan, 130 million yuan and 179 million yuan respectively, corresponding to year-on-year increases of 94.6%, 24.7%, and 37.9%, EPS of 0.84 yuan, 1.04 yuan and 1.44 yuan, respectively. The PE corresponding to the stock price on the reporting date will be 23.8 times, 19.1 times and 13.8 times, respectively. Considering that the company's growth is expected to be slightly higher than that of the industry's leading mature leaders, we gave the company a valuation level slightly higher than that of its peers, gave the company 24E performance forecast 23 times PE, and the corresponding target price was 24.03 yuan/share, giving it an “gain” rating.
Risk warning: New product promotion falls short of expectations, channel development falls short of expectations, risk of fluctuating raw material prices, food safety risks.