Incidents:
The company disclosed its 2023 annual report, achieving revenue of 3.747 billion yuan, an increase of 15.37%; net profit to mother was 233 million yuan, an increase of 120.12% over the previous year; and plans to distribute cash dividends of 2.40 yuan (tax included) for every 10 shares to shareholders
The company disclosed its 2024 quarterly report and achieved revenue of 888 million yuan, up 24.42% year on year, -15.15% month on month; net profit to mother was 56 million yuan, up 259.00% year on year, -0.36% month on month
Gross profit margin has increased steadily, and investment in sales and R&D has been strengthened
In 2023, the company's gross sales margin was 26.28% (+6.49pcts year on year), and the net sales margin was 7.79% (+4.07pcts year over year). The year-on-year increase in the company's profit in 2023 is mainly due to the increase in the profit level of the company's overseas business and the promotion of gross margin optimization of the entire domestic industry chain. In terms of expenses, the company's sales/management/ R&D/ finance expenses in 2023 were 3.87/1.44/0.48/0.29 billion yuan respectively, +27.71%/+23.19%/+10.48%/+92.60%, respectively; the significant increase in financial expenses was due to an increase in interest expenses on convertible bonds during the reporting period.
Domestic and overseas business grew in two rounds, and multi-category product performance maintained positive growth by region. In 2023, the company's pet business achieved revenue of 10.86/2,662 billion yuan respectively, +20.40%/+13.44% year-on-year, accounting for 28.97%/71.03% of revenue respectively. By product, the company achieved operating revenue of 23.51/6.35/577 billion yuan for pet snacks/canned food/dried food, respectively, +9.81%/+5.76%/+60.23% year-on-year, and gross margins of 25.39%/32.62%/29.06%, respectively.
Production and sales have achieved rapid growth. The three major private brands have built core competitiveness. The company's sales volume/production/inventory volume of pet food and supplies in 2023 was 9.96/8.53/12,12,000 tons, respectively, +10.46%/+9.80/ -12.03% year-on-year, respectively. Multiple sales channels helped enhance the company's sales side advantage. Furthermore, the company has formed three independent brands centered on “Wanpy Playful”, “New Zealand ZEAL True”, and “TOPTREES Leading”, creating a differentiated brand matrix and jointly building the company's core competitiveness.
Profit Forecasts, Valuations, and Ratings
The company's 2024-2026 revenue is estimated to be 44.11/51.57/6.070 billion yuan respectively, +17.71%/+16.92%/+17.69% year-on-year, and net profit to mother of 2.93/3.61 billion yuan, respectively, +25.84%/+22.96%/+24.37% year-on-year, and EPS of 1.00/1.23/1.53 yuan/share, respectively. Referring to comparable company valuations, a target price of 30 yuan, maintaining a “buy” rating.
Risk warning: product competition risk; raw material price fluctuation risk; exchange rate fluctuation risk.