Incidents. The company released its 2023 annual report: in 2023, the company achieved total revenue of 2,714 billion yuan, a year-on-year increase of 12.6%; net profit to the mother was 142 million yuan, down 27.7% year on year. After excluding the impact of the new agricultural dairy industry, net profit to the mother was 237 million yuan, up 8.7% year on year; of these, Q4 single-quarter company achieved total operating revenue of 631 million yuan, up 13.0% year on year, and net profit to mother of -005 million yuan, down 101.1% year on year. At the same time, the 2023 profit distribution plan was announced: a cash dividend of 1.36 yuan (tax included) will be distributed for every 10 shares, and the dividend rate is 30.2%.
The room temperature business is growing steadily, and the overseas layout is expanding well. By product: The company's revenue in the dairy sector was +13.8% year over year, with room temperature dairy revenue maintaining steady growth, +18.7% year over year, revenue share +2.86pct year over year, low temperature dairy revenue +7.6% year over year; 23Q4 room temperature/low temperature dairy revenue was +13.0%/+18.6%, respectively. We think the rapid recovery of low temperature milk in the fourth quarter may be related to the improvement in consumption power in the mainland region; the animal husbandry sector's revenue ratio in the year 23/23Q4 was -10.1%/-41.6%, Yohara It is related to phased oversupply in the dairy industry. By region: The company is increasing its active development efforts in overseas markets and increasing sales contribution in overseas markets. Overseas market revenue in '23/23Q4 was +20.8%/+28.6%, with revenue accounting for +3.23pct/+5.83pct to 46.3%/49.0%, respectively; the domestic market achieved full coverage of county-level markets, and revenue in '23/23Q4 was +6.0%/+1.7% YoY. The net number of dealers increased by 52 to 930 in 23Q4, with an increase of 6/46 in domestic/overseas markets respectively.
Gross margin increased slightly in '23, and net margin levels were under pressure in the short term. The company's gross margin was +1.23pct to 19.1% year over year in '23. We think we may benefit from the decline in raw milk prices and product structure optimization; 23Q4 gross margin was -0.07pct to 17.6% year over year. The cost ratio for the 23-year period was +1.82pct to 10.6%, of which the sales/management/finance/R&D expenses ratio was +0.23pct/+0.22pct/+0.49pct to 5.4%/3.6%/0.9%/0.7%, respectively. The increase in R&D expenses was mainly due to the company's increased investment in R&D of new products and the improvement and investment in animal husbandry farming technology; the increase in financial expenses was mainly due to the inclusion of Xinnong Dairy in the scope of the company's consolidated statements and the increase in the company's financing expenses for the acquisition of Xinnong Dairy. Net interest rates due to -2.92 pct/-7.69 pct to 5.2%/-0.1% year over year, respectively, were mainly affected by: 1) the increase in the cost rate during the period, which was +1.82 pct/+3.80 pct to 10.6%/11.9%, 2) non-operating expenses were +284.7%/+295.3% year over year to 0.75/35 billion yuan, respectively, mainly due to increased biological asset elimination losses.
The launch of new products consolidated its competitive advantage, and Xinnong Dairy gradually got on the right track. The company continues to improve its product matrix, complete the development of more than 70 new products, and successively launched new products such as zero-sucrose yogurt, sea buckthorn milk beer, and apricot peanut yogurt to consolidate its competitive advantage. Furthermore, after the acquisition, Xinnong Dairy adjusted its organizational structure and process specifications according to the company's business linear management model, and initially completed the construction of a marketing sales service model to achieve a smooth and smooth transition, and all production and operation gradually entered the right track.
Profit forecasting and investment advice. We expect the company's 2024-2026 EPS to be 0.57, 0.64, and 0.70 yuan/share, respectively. Referring to comparable company valuations, we gave the company 16-20 times PE in 2024, with a corresponding reasonable value range of 9.06-11.32 yuan, maintaining a “superior to the market” rating.
Risk warning. Prices of raw materials fluctuated greatly, industry competition intensified, etc.