incident. The company released its 2023 annual report: In 2023, the company achieved total operating income of 4,049 billion yuan, a year-on-year decrease of 16.2%; net profit of 63.34,500 yuan, a year-on-year decrease of 53.1%; of these, Q4 achieved total revenue of 974 million yuan in a single quarter, a year-on-year decrease of 2.6%, a net profit of 29.5.62 million yuan, and a net loss of 6.025 million yuan for the same period last year.
Cheese business performance was under pressure, and the decline in Q4 revenue narrowed month-on-month. By product: Cheese business performance in '23 was under pressure, with revenue -18.9% YoY (volume -17.4%, price -1.8%), of which the ready-to-eat nutrition series revenue was -23.9%. We think it may be related to supermarket channel recovery falling short of expectations and sales pressure on low-temperature cheese sticks; room temperature cheese sticks benefited from channel expansion and broken scenes to bucked the trend. Under a high base, the revenue of the household dining table series was -36.1%; the revenue of the catering industry series was +7.6% year-on-year, mainly due to the company's supply chain and specialized service advantages and the recovery of the food and beverage consumption scenario. Liquid milk/trading business revenue in '23 was -4.3%/-5.4% YoY. The 23Q4 company's revenue decline narrowed month-on-month (23Q1/Q2/Q3 revenue -20.5%/-20.2%/-18.3% year-on-year, respectively), with cheese/trade/liquid milk revenue of -20.7%/+1198.9%, respectively. Channel by channel: Distribution/direct/trade channel revenue in '23 was -15.2%/-29.2%/-5.4%, with Q4 revenue year-on-year ratio of -12.2%/-39.1%/+1198.9%, respectively. By region: North District/Central District/South District revenue in '23 was -23.8%/-9.6%/-11.7%, respectively. In 23Q4, there was a net increase of 182 dealers to 5036.
Rising costs put pressure on gross margins, and cost control frees up profit margins. Gross margin of -4.92pct/-8.30pct year-on-year in '23Q4 was 29.2%/25.0%, respectively, mainly due to rising raw material costs and exchange rate fluctuations.
The company's expense ratio remained good during the 23-year period (-2.33 pct to 28.6% year on year). Among them, the sales expense ratio was -2.06 pct to 23.2% year over year, mainly due to the company's advertising promotion/storage fee ratio -3.34 pct/-0.23 pct year on year; the management expense ratio was -1.38 pct to 3.7% year over year, mainly due to a decrease in equity incentive costs and consulting service fees. The net interest rate for the year 23 was 1.28pct to 1.6% year-on-year. The 23Q4 company achieved net profit of 295.602 million yuan, compared to -6.05525 million yuan in the same period last year, mainly benefiting from good expense control during the period. The cost rate for the 23Q4 period was -12.06 pct to 20.6%, with sales/management/R&D -9.86pct/-2.07pct/-0.98pct, respectively.
The product matrix continues to improve, and the majority shareholders have shown confidence by increasing their holdings. In '23, the company's low-temperature cheese products have been continuously iteratively upgraded, launching new organic cheese sticks that are fully organic, have high cheese content, and are naturally high in calcium; in terms of room temperature products, the company launched a variety of popular cheese snacks such as small cheese triangles and cheese pudding. Furthermore, as of March 1, 23, Mengniu's current plan to increase its holdings by a total of 6.8973 million shares, accounting for 1.34% of the company's total share capital. The increase in holdings was 125 million yuan. The majority shareholders' holdings increase their confidence in development.
Profit forecasting and investment advice. We expect the company's 2024-2026 EPS to be 0.33, 0.40, and 0.47 yuan/share, respectively. Referring to comparable company valuations, we gave the company 35-45xPE in 2024, with a corresponding reasonable value range of 11.44-14.70 yuan, maintaining a “superior to the market” rating.
Risk warning. Market competition intensified, and sales of new products fell short of expectations.