Report highlights:
occurrences
The company announced its 2023 annual report. In 2023, the company achieved total revenue of 99.095 billion yuan (+6.62%) and net profit of 4.809 billion yuan (-9.31%) to mother. In 23H2, the company achieved total revenue of 47.763 billion yuan (+6.21%) and net profit of 1,789 billion yuan (+54.83%) to mother. The company plans to pay a cash dividend of 0.489 yuan per share, with a dividend rate of 40.01%.
Liquid milk grew steadily, and Miocalanduo added revenue to the cheese business 1) Liquid milk grew steadily, and Miacolando also increased revenue from the cheese business. In 2023, the company's revenue from liquid milk, ice cream, milk powder, cheese and other products was 820.71, 60.26, 38.02, 43.57, and 2,368 billion yuan, respectively, compared with +4.86%, +6.62%, -1.56%, +229.81%, and -32.13%. Liquid milk grew steadily, and the sharp increase in the cheese business was mainly influenced by the merger of Myocorando. After excluding the cheese business, the company's revenue was +1.81% year over year.
2) Liquid milk H2 revenue was +4.73% year-on-year, maintaining a steady growth rate. 2023H2, the company's revenue from liquid milk, ice cream, milk powder, cheese and other products was +4.73%, -1.79%, -3.06%, +170.89%, and -24.02%, respectively. Liquid milk maintained steady growth (liquid milk 23H1 +4.98% YoY).
Gross margin continues to rise, and net profit growth is not affected in the short term by declining earnings 1) Gross margin continues to rise. In 2023, the company's gross margin was 37.15%, +1.85% year over year, mainly due to falling raw milk prices and upgrading the company's product structure. 2023H2, the company's gross margin was 35.81%, +1.86pct year-on-year.
2) Investment in sales expenses has increased, and the net profit growth rate has not been affected in the short term by a decrease in revenue. In 2023, the company's net interest rate to mother was 4.88%, -0.85pct year on year, mainly due to an increase in sales and financial expenses, as well as a decrease in other revenue and performance attributable to associated companies.
a) The company's sales, management and financial expenses ratio in '23 was 25.54%, 4.81%, and -0.11%, compared with +1.41, +0.01, and +0.17pct. The increase in sales expenses was mainly due to the company's increase in offline sales and promotion activities.
b) The company's other revenue in '23 was 1,069 million yuan, or -50.02%, accounting for -1.23pct of operating income year-on-year, mainly due to a decrease in fair value income from asset disposal and other financial liabilities.
c) The company should have accounted for -77.52% of the associated company's performance in '23 to $92 million, accounting for -0.35 pct of revenue year over year. The base was high mainly due to one-time revenue generated by the sale of subsidiaries in '22.
3) The profit margin of liquid milk increased steadily, the profit margin of milk powder improved significantly, and the profit margin of the ice cream business increased significantly.
By business, in 2023, the profit margins of the company's liquid milk, ice cream, milk powder, cheese and other products were 7.46%, 7.10%, -5.23%, 3.36%, and -8.37%, respectively, +0.16, +6.64, +33.57, +0.21, and -9.93pct. The profit margin of the ice cream business increased significantly, and the profit margin of liquid milk increased steadily.
Leading channel advantage, rapid iteration of new products
1) In the short term: a) The upgrading of the white milk structure continues, and the fresh milk business position is stable. In 23 years, the company's organic series grew by double digits, and the white milk product structure continued to be upgraded; the fresh milk business outperformed the industry, and Daily Fresh Language maintained a benchmark position for high-end fresh milk. b) Raw milk prices have declined, and gross margin is expected to continue to improve. According to data from the Ministry of Agriculture and Rural Affairs, the price of raw milk continues to fall. As of 24/3/21, the price of fresh milk was 3.53 yuan/kg, down about 14.32% since the beginning of '23 and about 3.55% since the beginning of '24.
2) In the medium to long term, the company has leading channel advantages, rapid iteration of new products, and the market share is expected to increase further.
Investment advice
We expect the company's net profit to be 54.36 billion yuan, 59.83 billion yuan, and 6.483 billion yuan respectively in 2024, 2025, and 2026, up 13.04%, 10.05%, and 8.36% year-on-year, corresponding to PE 12, 11, and 10 times (market value of 67.7 billion yuan) on March 27, respectively, maintaining the “buy” rating.
Risk warning
Food safety risks, risk of fluctuations in raw milk prices, risk of policy adjustments.