Matters:
The company disclosed its 2023 annual report. It achieved full-year revenue of 2,037 billion yuan, a year-on-year increase of 7.96%, and achieved net profit of 767.671 million yuan, a year-on-year decrease of 40.33%, after deducting non-return net profit of 667.01 million yuan, a year-on-year decrease of 49.03%, and EPS of 0.61 yuan/share. The fourth quarter achieved revenue of 508 million yuan, a year-on-year increase of 34.60%, net profit to mother of 24.5.563 million yuan, a year-on-year decrease of 27.10%, deducted net profit of 18.116,300 yuan, a year-on-year decrease of 37.31%, and EPS was 0.19 yuan/share.
Commentary:
Overseas revenue is under pressure, and domestic business continues to improve.
1) By industry, the company's pet products revenue was 1.33 billion yuan, -1.45%, accounting for 65.27% (yoy-6.23pct); pet food revenue was 688 million yuan, +34.63%, accounting for 33.80% (yoy+6.7pct); other business revenue was 119 million yuan, -28.29% year-on-year, accounting for 0.93% (yoy-0.46pct). The pet food business accounted for rapid growth. 2) By product, pet litter mats/cat crawlers/ pet toys/ other supplies/ pet food/ other business revenue was 2.56/3.72/2.96/4.06/6.88/ 0.19 billion yuan respectively, or -6.33%/-1.62%/-3.65%/+3.86%/+34.63%/-28.29%, respectively. The growth rate of the pet food business was impressive. 3) By region, the company's overseas revenue was 1,125 billion yuan, -5.24% year on year, accounting for 55.25% (yoy-7.69pct); domestic revenue was 912 million yuan, +30.37% year over year, accounting for 44.75% (yoy+7.69pct), and the domestic business share continued to increase.
The company's overall gross profit margin in 2023 was 17.77%, a year-on-year decline of -2.28pct.
1) By industry, the company's gross profit margin for pet products was 22.36%, +0.68pct year on year; gross profit margin for pet food was 8.79%, -5.96pct year on year. The year-on-year decline in the company's comprehensive gross margin was mainly due to an increase in the share of pet food revenue, but the gross margin was relatively low. 2) By product, the gross margin of pet litter mat/cat crawler/pet toys/other products/pet food was 23.33%/22.66%/24.12%/20.18%/8.79%, respectively, and +0.94/+0.06/+0.59/+1.35/ -5.96pct, respectively. 3) By region, the company's overseas gross margin was 22.83%, +0.86pct year on year; the company's domestic gross profit margin was 11.52%, -5.26pct year on year.
Financial expenses increased due to interest on bank loans and the amount of exchange earnings, and there was a slight loss in building a new factory. The company's financial expenses were RMB 11.818 million, +166.50% year-on-year, mainly due to an increase in interest expenses on bank loans and a significant decrease in the amount of exchange earnings compared to the previous year. At the end of '22, the company moved some of its product production capacity to Southeast Asia and other regions, and built a new plant for the production and sale of iron products, cat crawlers, etc., due to the initial slight loss.
Investment advice: Overseas business is expected to reverse in 24, focusing on the later growth of the domestic food business.
Considering that the export business benefited from exchange growth in 24 years or less, and the pace of overseas business recovery is still uncertain, we adjusted the 24-25 EPS forecast to 0.90/1.12 yuan/share (the original value was 2.02/2.53 yuan/share), and introduced a 26-year forecast of 1.40 yuan/share. According to the comparable company valuation method, the company was given 27 times PE in 24 years, and the target price was about 24.3 yuan. At the same time, referring to the cash flow discount valuation method, the conclusions drawn from the absolute valuation were cross-verified to maintain the “recommended” rating.
Risk warning: Exchange rate fluctuations, changes in the international political and economic environment, production model reliance on outsourcing, brand agency business renewal risks.