According to the 2023 results announcement, the company achieved revenue of 42.67 billion yuan (yoy +28%) and net profit to mother of 12.08 billion yuan (yoy +42%) in 2023. In 23H2, the company achieved revenue of 22.20 billion yuan (yoy +33%) and net profit to mother of 6.30 billion yuan (yoy +62%), and the performance continued to increase.
The performance of tea drinks has increased rapidly, and diversified businesses have gone hand in hand. By business, packaged water achieved revenue of 20.06 billion yuan (yoy +11%) in 2023, mainly benefiting from the increase in offline activities after the epidemic and the restoration of ready-to-drink channels; tea drinks achieved revenue of 12.66 billion yuan (yoy +83%), which is expected to benefit from rapid growth in Oriental leaf distribution rate and number of outlets; energy drinks achieved revenue of 4.90 billion yuan (yoy +28%). It is estimated that Powerdy's new flavors and multiple marketing methods contributed to the acceleration of growth; juice drinks achieved revenue of 3.53 billion yuan (yoy +23%), and other products achieved revenue of 1.31 billion yuan (yoy +23%) yoy -3%) In 23H2, revenue from packaged water/tea drinks/energy drinks/juice drinks/other products increased by 10%/105%/35%/15%/2%, respectively, and tea drinks maintained a high increase.
Gross profit margins have increased, expense ratios have declined, and profit levels are improving. In 2023, the company's gross margin was 59.5% (yoy+2.1pct), mainly due to the year-on-year decline in procurement costs for cartons, labels and some raw materials; the sales expense ratio was 21.8% (yoy-1.8pct), which mainly benefited from supply chain cost optimization; the management expense ratio was 5.1% (yoy-0.5pct), and the net sales margin was 28.3% (yoy+2.8pct), and the profit level continued to rise. By brand, the operating profit margins of each segment of packaged water/tea drinks/energy drinks/juice drinks increased by 1.0/4.5/2.2/6.6pct year-on-year, respectively. The profit margins of juice drinks and tea drinks increased significantly.
Negative public opinion has limited impact, so seize the opportunity of low-level configurations. Recently, negative online public opinion has had a certain impact on the company's online channel sales. At the same time, the company's stock price has also been negatively affected, but it is expected that the impact on the competitiveness of the company's products will be small. Looking at it now, the popularity of public opinion has declined. Combined with the company's high quality fundamentals, the current decline in market value is a good allocation opportunity.
According to the 23-year results announcement, revenue and gross profit margins were raised for 24-25, and expense ratios were lowered. We forecast the company's earnings per share for 23-25 to be 1.07, 1.17, and 1.32 yuan, respectively (the original forecast was 0.89, 1.02, and 1.17 yuan). Following the FCFF valuation method, the obtained equity value of the company was 556.1 billion yuan, calculated at the HKD/RMB exchange rate of 0.91, corresponding to the target price of HK$54.34, maintaining the purchase rating.
Risk warning
Negative public opinion was not properly addressed, consumption upgrades fell short of expectations, water sources were polluted, market share declined, or new product promotion fell short of expectations.