Core views
The company continues to increase its global market share through endogenous and epitaxial expansion, continuous optimization of supply chain efficiency, continuous release of management efficiency, good endogenous recovery, significant improvement in endogenous profitability, and quarterly improvement in BF operations, which is expected to gradually increase profitability under the company's global collaboration capabilities. As a leading domestic nutritional health food CDMO, the company has full-dosage platform development capabilities. It has established production bases and marketing centers in China, the US and Europe. Using the dividends of Chinese engineers and the global supply chain, the market share of the global nutritional health food CDMO market is expected to continue to increase.
occurrences
The company released the 2023 Annual Report and the First Quarter 2024 Report
The company's revenue in 2023 was 3,582 billion yuan, up 42.87% year on year, of which single Q4 revenue was 1,079 million yuan, up 50.08% year on year; Q1 revenue in 2024 was 952 million yuan, up 35.51% year on year;
The company's net profit to mother in 2023 was 281 million yuan, up 32.39% year on year, of which net profit from single Q4 was 96 million yuan, up 165.5% year on year; 2024Q1 net profit to mother was 63 million yuan, up 114.39% year on year;
Brief review
The endogenous business continues to recover, and BF is slightly dragged down
By product, the company's revenue in 23 years was 15.27/3.62/2.93/7.40/4.22/1.52/0.73/014 billion yuan, respectively, up 54.0%/6.2%/52.5%/24.8%/24.7%/300.3%. The faster growth rate of core softgels is mainly driven by combined BF, and categories such as powders, gummies, and functional drinks also maintained a relatively rapid growth rate.
By region, revenue for China, America, Europe, and other regions was 18.51/10.44/5.29/158 million yuan respectively, up 24.1%/93.0%/33.8%/98.6% year-on-year, and gross margin was 34.6%/20.2%/33.9%/34.1%, respectively. Among them, the European part is driven by the company's exploration of new markets such as southern Europe and eastern Europe and promotion of new dosage forms, and the year-on-year growth rate is relatively fast. At the same time, the company merged with BF in 23, leading to high growth in the American business. After deducting BF, the company's US endogenous business revenue was 360 million yuan in 23 years, down 33.5% from the previous year, mainly due to the impact of US inventory removal. BF's revenue in 2023 was 685 million yuan, down 11% year on year. Orders for personal care and soft candy were gradually released in '24, and BF is expected to improve quarter by quarter.
Endogenous profit margins have reached a new high in recent years, and global collaboration has improved efficiency
Net profit from BF in '23 - 143 million yuan, including a loss of 102 million yuan in the company's statements. It is mainly a one-time amortization adjustment included in 23Q4. After deducting BF, the company's net profit for 23 years was 383 million yuan, up 80.3% year on year, and endogenous net interest rate reached 13.2%, up 4.7 pcts year on year, setting a new high for the company in recent years.
In 2023, the company's sales expense ratio/management expense ratio was 7.8%/9.8%, with a year-on-year change of 2.6/-2.3 pcts. The increase in sales expense ratio was mainly due to the consolidated BF; the 2024Q1 company's sales expense rate/management expense ratio was 7.7%/9.7%, respectively, with a year-on-year change of 0.2/-2.2 pcts. In 2024, Q1's net profit margin was 6.6%, a year-on-year change of 2.4 pcts. It mainly benefited from the quarterly decline in BF orders and a gradual increase in gross margin driven by the company's global synergy.
Reforms continue to improve efficiency, and there is strong certainty in motivating the achievement of goals
In October 23, the company successively announced the 2023 restricted stock incentive plan and employee stock ownership plan, awarding 1,546.25 million restricted shares (about 0.86% of the total share capital) to 76 senior managers, managers and core technical personnel, including 3 expatriates. The 24/25/26 equity incentive target was 43.12/49.27/5.566 billion yuan. The 24-year revenue increased 20.4% year-on-year. The employee shareholding assessment set a profit of 400.5 million yuan for 24 years.
The company uses Chinese engineer dividends and the global supply chain to build a global collaborative product development and production service system, continuously explore the market with a “strong manufacturing platform+ leading new product layout+ efficient service” business model, and build a “business+solution+project management” Iron Triangle organization to operate collaboratively. Supply chain optimization and efficiency improvement and cost reduction continue to drive the company's management optimization.
Profit forecast and investment advice: The company's endogenous business continues to recover, and BF is expected to improve quarterly. We expect revenue for 2024-2026 to be 44.01/51.54/5.840 billion yuan, respectively, and net profit of 4.09/4.87/559 million yuan, respectively, maintaining a “buy” rating.
Risk warning:
1. Food safety issues: The company's products focus on health and health benefits, and the processing and production process requires strict control. If there are many adverse reactions or food safety incidents, it will have a negative impact on the company's image and products.
2. Risk of fluctuations in raw materials: The company's upstream is dominated by raw materials such as fish oil and gelatin. If the price of raw materials continues to rise, it will erode the company's profitability and may have a great impact on the company's net profit.
3. Economy falls short of expectations: If demand from Europe and the US weakens, domestic exports fall, or if the domestic economy weakens, consumer spending power declines, and residents' desire to buy health-care food options declines, it will affect the company's income.