Overseas business maintained a high level of prosperity, with net profit attributable to mother +259% year-on-year in 24Q1. The company achieved revenue of 3,747 billion yuan in 2023, +15.37% year-on-year. The main reason was that overseas business was booming during the reporting period and domestic brand business continued to expand, and sales volume of pet food and supplies was +10.46% year-on-year. The company achieved net profit of 233 million yuan in 2023, +120.12% year over year, mainly due to overseas business benefiting from the US retail market and a strong US dollar exchange rate, and a year-on-year increase in gross margin.
On a quarterly basis, overseas business remained strong in 24Q1, and brand business continued to be promoted. Revenue was +24.42% to 888 million yuan, and gross sales margin increased to 28%, driving net profit to mother +259.00% year-on-year to 148 million yuan. In addition, benefiting from the strong US dollar exchange rate, the year-on-year decrease in exchange losses led to the company's financial expenses being -50.26% compared to the same period last year.
By product: In 2023, the snack business achieved revenue of 2,351 billion yuan, +9.81%, revenue accounting for 63%, gross margin +6.82pct to 25.39%; the canned pet business achieved revenue of 635 million yuan, +6% year over year, revenue accounting for 17%, gross margin +6.21pct to 32.62% year over year; the staple food business achieved revenue of 577 million yuan, +60% year over year, and gross margin +8.61% to 29.06% year over year.
By region: In 2023, the domestic business achieved revenue of 1,081 billion yuan, +20% year-on-year, revenue accounting for 29%, and gross margin of +3.51 pct to 31.28% year over year, benefiting from brand business expansion and maintaining rapid revenue growth; overseas business achieved revenue of 2,533 billion yuan, +13% year over year, with revenue accounting for 71%, gross margin +7.97% to 25.22% year over year, mainly benefiting from the strong US dollar exchange rate and overseas retail trend. With its own brand business as the core, the company focuses on the three major brands of “Playful,” “Leading,” and “Zeal”, and continues to expand the domestic market. At the same time, the company also relies on US and Canadian factories to accelerate overseas market expansion, and ultimately promote domestic and foreign business to maintain rapid growth at the same time.
Looking at the model: in 2023, the OEM business achieved revenue of 2.53 billion yuan, +14%, accounting for 58%, gross margin +7.85pct to 26.13% year on year, clearly benefiting mainly from the overseas retail boom and the strong US dollar exchange rate; the distribution business achieved revenue of 1,121 billion yuan, +9% year over year, accounting for 30%, gross margin +7.97 pct to 25.22% year on year; direct sales business achieved revenue of 466 million yuan, +47% year over year, accounting for 12%, gross margin +1.3% to 43.73 %
Risk warning: risk of large exchange rate fluctuations; risk of trade conflict between China and the US; risk of brand business promotion falling short of expectations.
Investment advice: Considering that overseas retail sales remain strong, the US dollar exchange rate remains strong, and the company's overseas business is expected to benefit, we adjusted the company's 2024-2025 net profit forecast to be 27/310 million yuan (originally 21/230 million yuan), and the company's net profit to the mother in 2026 was 350 million yuan, with year-on-year growth rates of +14%/15%/13% and EPS of 0.90/1.04/1.18 yuan respectively, maintaining the “buy” rating.