Incidents:
The company released its 2024 quarterly report. 2024Q1 achieved operating income of 3,587 billion yuan, an increase of 1.72% year on year; net profit to mother of 103 million yuan, an increase of 58.90% year on year; after deducting non-net profit of 103 million yuan, an increase of 81.72% year on year.
Continuation of product structure upgrades
2024Q1 achieved revenue of 3,587 billion yuan, +1.72% year over year. We expect a slight increase in tonnage price and sales. The tonnage price growth rate is faster than the tonnage cost growth rate, and the product structure upgrade will drive gross margin +0.40pct to 37.18% year over year. We expect U8 to continue its double-digit growth. As the construction of a large single product+specialty product system progresses, the company's product structure is expected to continue to be optimized and upgraded. The high-end trend is clear, and there is still plenty of room. Looking ahead to Q2, the peak beer season is coming soon, and the company has also begun to gradually launch a series of marketing activities, which are expected to drive up sales.
Cost reduction and efficiency drive increased profitability
The results of the cost reduction and efficiency work continued to show. The 2024Q1 company's effective tax rate was -7.30pct to 21.41% year on year, or benefited from the subsidiary's continuous loss reduction; the cost rate was -0.61pct to 24.64% year over year, with sales/management/R&D/finance expenses ratios of -0.57/-0.21/-0.06/+0.23pct to 11.93%/11.76%/1.90%/-0.95%, driving net profit margin +1.03pct to 2.86% year on year after deducting non-net interest rate + 1.26pct to 2.86%. Compared with peer companies, there is still a lot of room for improvement in net interest rates. We expect that as the company's revenue continues to grow and cost reduction and efficiency progress steadily, costs and expense ratios are expected to continue to be diluted, leading to a further increase in the company's profitability.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 153.47/163.94/17.216 billion yuan respectively, with year-on-year growth rates of 7.98%/6.83%/5.01%, net profit to mother of 9.42/12.45/1,562 billion yuan respectively, year-on-year growth rates of 46.13%/32.17%/25.48%, EPS 0.33/0.44/0.55 yuan/share respectively, and a 3-year CAGR of 34.32%. Given that the company's large single product, U8, is still growing rapidly, and the potential to release profits in 24 years under cost reduction and efficiency is still high. Referring to comparable company valuations, we gave the company 40 times PE in 2024, with a target price of 13.37 yuan, maintaining a “buy” rating.
Risk warning: raw material prices fluctuate; new product promotion falls short of expectations; changes in market competition pattern