Event: The company released its 2023 annual report and 2024 quarterly report. In '23, the company achieved operating income of 3,582 billion yuan, an increase of 42.87% over the previous year; net profit to mother was 281 million yuan, an increase of 32.39% over the previous year.
The 24Q1 company achieved operating income of 952 million yuan, an increase of 35.51% year on year, and realized net profit of 63 million yuan, an increase of 114.39% year on year.
Rapid growth throughout '23, and continued strong growth in 24Q1. In '23, the company achieved revenue of 3,582 billion yuan, an increase of 42.87%. Among them, 23Q4 achieved revenue of 1,079 billion yuan, an increase of 50.08% over the previous year. The domestic business market share further increased, and the overseas business market penetration rate continued to increase.
The 24Q1 company achieved revenue of 952 million yuan, an increase of 35.51% over the previous year. We judge that after upgrading the marketing team in China, the US, Europe, and emerging markets, the company performed well in business development due to the company's product strength and gradually expanding brand influence.
Looking at regions, in '23, the company implemented customer development strategies according to local conditions, comprehensively upgraded the global marketing team, and integrated BF after investment to improve operational efficiency, with remarkable results.
China: In 2013, the company achieved revenue of 1,851 billion yuan in China, up 24.1% year on year, of which 23H2 achieved revenue of 1,053 billion yuan, an increase of 28.7% year on year. The company consolidates high-value customers in China, sets a benchmark for the operation of strategic customer projects, drives the expansion and standardization of high-value customers, and increases the development of retailers and innovative businesses. The company actively identifies and seizes opportunities, has deep insight into customers and markets, focuses on important projects, and achieves high-quality continuous growth. More than 300 new projects were launched during the reporting period, and the utilization rate of R&D resources was effectively improved.
America region: In 2013, the company achieved revenue of 1,044 billion yuan in the American region, an increase of 93.0% over the previous year. Of these, 23H2 achieved revenue of 604 million yuan, an increase of 87.2% over the previous year. The company's rapid growth in the US is mainly due to the combination of the BF business. The company is implementing a major customer strategy to further consolidate linkage relationships with major customers in the American region and guide major customers from initial contact to order conversion. Furthermore, the company uses BF's production capacity to develop cross-border customers and expand cross-border business. In terms of sales team upgrading, the company integrated BF with the company's original sales team to coordinate sales management and business development in the American region.
Europe: In 2008, the company achieved revenue of 529 million yuan in Europe, an increase of 33.8% over the previous year. Of these, 23H2 achieved revenue of 270 million yuan, an increase of 24.5% over the previous year. The company achieved an increase in the volume of existing national brands and channel customers, accurately realized the customized development needs of customers, and launched a list of main products to attract customers; the company formulated and launched a major customer management plan to break through the business of major European brands and increase the number of major customers. Looking at regional expansion, the company is expected to continue to grow by entering emerging markets such as Eastern Europe, Central Europe and the Middle East, building a local sales network, increasing the popularity of the Xianle manufacturing brand in the region and expanding its local business.
Other regions: In '23, the company achieved revenue of 158 million yuan in other regions, up 98.6% year on year. Of these, 23H2 achieved revenue of 110 million yuan, an increase of 164.2% year on year. The company has initially formed a team for the Asia-Pacific region. It has completed scanning of high-potential enterprises in the Asia-Pacific region, drawn up a list of key customers, established business contacts with key potential customers, and gradually implemented cooperation with key Australian brand customers.
Profitability declined in '23 due to BF consolidation, and significant improvement in 24Q1 gross margin led to an increase in profitability. In '23, the company achieved net profit of 281 million yuan, a year-on-year increase of 32.39%. Of these, 23Q4 achieved net profit to mother of 96 million yuan, an increase of 165.50% over the previous year. In 24Q1, the company achieved net profit of 63 million yuan, an increase of 114.39% over the previous year. In terms of profitability, the company achieved a gross profit margin of 30.27%, a year-on-year decline of 0.91 pct, a year-on-year decline of 6.71%, and a year-on-year decline of 1.76 pct. The decline in the company's profit level was mainly due to a 2.56 pct increase in sales expenses to 7.75%, which is related to the resumption of marketing activities and the acquisition of BF consolidated sales expenses and intangible asset value-added amortization expenses. 24Q1's profitability improved significantly, achieving a gross profit margin of 30.62%, a year-on-year increase of 2.95pct, a net profit margin of 5.66%, and a year-on-year increase of 2.99pct.
Looking ahead to 24 years, focus on six key functional tracks and adhere to the big customer strategy to expand global business. By category, the company will continue to focus on the development of the six key functional tracks of anti-aging, probiotics, beauty and health, mental and brain metabolism, immunity improvement, and sports nutrition, focusing on breaking through the two major strategic tracks of anti-aging and probiotics; fully exploiting the value and market potential of anti-aging functions in the context of aging, laying out the anti-aging theme market ahead of time; and promoting the rapid growth of the probiotic category. By region, China is developing deep into high-value customers, seizing large market stocks, increasing market share, and increasing revenue growth; the American region adheres to the big customer strategy and also develops new market segments such as retailers, e-commerce channels, and startups; the European region adheres to the big customer strategy and will expand emerging markets such as southern Europe, Eastern Europe, and the Middle East, and increase business development efforts for plant-based softgels, gummies, and beverages; the Asia-Pacific region will use ASEAN integration and RCEP opportunities to expand the Southeast Asian business and develop leading Australian customers.
Profit forecast and investment rating: We believe that from the perspective of the nutritional and health food industry chain, there is relatively strong certainty that production leaders will increase their share. The company's endogenous business is growing steadily, the acquired BF business operations continue to improve, and the company's global layout advantages are gradually showing, and it is expected that the market share will continue to increase.
We expect the company to achieve net profit of 429/5.19/592 million yuan in 2024-26, +53%/+21%/+14% year over year, respectively. The current stock price corresponds to 2024-26 PE of 15x/13x/11x respectively, maintaining the “recommended” rating.
Risk warning: food safety incidents, market demand falling short of expectations, increased industry competition, BF integration falling short of expectations, etc.