Core views
The consumption environment slowly recovered in 2023, the company's liquid milk sales slowed, and the low price of raw milk put pressure on the animal husbandry sector. In December 2023, the Shanghai Pudong New Area Government plans to store plot 777 Chengshan Road, which is expected to affect the company's pre-tax revenue of about 424 million yuan in 2023. Combined with the year-on-year decrease in the company's sales expenses, the company achieved net profit of 930-1,030 million yuan for the whole year, an increase of 157.84%-185.57% over the previous year. Net profit after deducting non-recurring profit and loss also reached 500-600 million yuan for the whole year, an increase of 196.41%-255.69% over the previous year, mainly due to the impact of external environmental factors in 2022 and the low base impact caused by preparation for asset impairment.
The company promotes the layout of milk sources to ensure the implementation of the “fresh” strategy. The marketing side also carries out various activities in multiple dimensions. It has reserves of new products in fresh milk, yogurt, probiotics, ice cream, etc., which will be launched in an orderly manner according to market demand. Following the recovery of consumption power levels, the company's product sales growth rate is expected to return to the right track.
occurrences
On January 30, the company announced a pre-increase in its 2023 results: It is expected to achieve net profit of 930-1,030 million yuan for the whole year, an increase of 157.84%-185.57% over the previous year, and net profit of 500-600 million yuan after deducting non-attributable net profit of 500-600 million yuan, an increase of 196.41%-255.69% year-on-year. Among them, net profit attributable to mother was 607-707 million yuan in the fourth quarter of the year, changing from negative to positive, with a loss of 0.09 billion yuan in the fourth quarter of '22; net profit after deducting non-return to mother was 188-288 million yuan, which changed from negative to positive year-on-year, and a loss of 113 million yuan for the fourth quarter of '22.
Brief review
Land collection and storage contributed to performance, and revenue side was under phased pressure
The consumption environment slowly recovered in 2023, the company's liquid milk sales slowed down, and the low price of raw milk put pressure on the animal husbandry sector. In December 2023, the Shanghai Pudong New Area Government plans to store plot 777 Chengshan Road, which is expected to affect the company's pre-tax revenue of about 424 million yuan in 2023. Affected by this, the company achieved net profit of 930-1,030 million yuan for the whole year, an increase of 157.84%-185.57% over the previous year; in the fourth quarter, the company achieved net profit to mother of 607-707 million yuan, which changed from negative to positive over the previous year.
Thanks to the fall in raw milk prices, which partially reduced liquid milk business costs, and the year-on-year reduction in sales expenses, compounded by the impact of external environmental factors and the low base in '22 due to the impact of external environmental factors and the calculation of asset impairment reserves, the company's net profit after deducting non-recurring profit and loss increased significantly. Net profit without return to mother was 500-600 million yuan for the whole year, up 196.41%-255.69% year on year; net profit without deduction for the fourth quarter of the single quarter was 188-288 million yuan, which changed from negative to positive year-on-year, with a loss of 113 million yuan in the fourth quarter of '22.
Consolidate the foundation of a “fresh” strategy and promote marketing and new product development
As the number one fresh milk brand in China, the company continues to promote the layout of milk sources to ensure the implementation of the strategy. The company completed construction of Ningxia Zhongwei, Anhui Funan, Anhui Huaibei, Hachuan Phase II, and Jinshan projects in the first half of '23. The marketing side is also carrying out various activities in multiple dimensions. In 2023, the company reached cooperation with the Shanghai Rolex Masters, the Chinese Women's Volleyball Team, League of Legends, and the China Shanghai International Art Festival. In 2024, it will also reach deep partnerships with the Shanghai Museum and Shanghai Film Co., Ltd. to break marketing boundaries through cross-border cooperation. In terms of new products, the company has reserves of new products in fresh milk, yogurt, probiotics, ice cream, etc., which will be launched in an orderly manner according to market demand. Thirty new products were launched in the first half of the year, including new products such as the Changyou 0 Abitan-flavored Fermented Milk series and Youbei Organic Fresh Milk. Recently, the Fresh Spokesperson Package for Youbei Fresh Milk and the Upex Concentrate 3.6 Fresh Milk/4.0 Fresh Milk Dragon Year Limited Package have also been launched.
Profit forecast: The company is expected to achieve revenue of 281.54, 303.93, 33.017 billion yuan in 2023-2025, and achieve net profit of 9.77, 6.66, and 777 million yuan, corresponding EPS of 0.71, 0.48, and 0.56 yuan, and corresponding PE of 12X, 17X, and 15X.
Risk warning:
1. Fix the risk of falling short of expectations: residents' travel has continued to grow since 23 years, and the dairy sales scene has gradually recovered. If traffic recovery falls short of expectations in the sales scenario, it will affect product sales of dairy companies.
2. Risk of a rapid rise in raw milk prices: Direct materials account for a relatively high proportion of the cost of dairy products, of which raw milk and milk powder account for a relatively large share. In recent years, major raw milk importers have gradually reduced production capacity, compounded by high feed costs. If raw milk costs rise above expectations, it will affect the profit level of enterprises.
3. The degree of competition is slowing down below market expectations: Increased competition among dairy companies will cause market expenses such as advertising and promotion to continue to increase, affecting the profit level of enterprises.