Core views:
Yuanfei Pet publishes 23 annual reports and 24 quarterly reports. In '23, the company achieved revenue of 991 million yuan, a year-on-year increase of 3.94%, net profit to mother of 126 million yuan, a year-on-year decrease of 20.45%, and net profit after deducting non-return to mother of 124 million yuan, a year-on-year decrease of 16.4%. 24Q1 revenue was 246 million yuan, up 30.67% year on year, net profit to mother was 0.37 million yuan, up 72.51% year on year, net profit deducted from non-return mother was 0.33 million yuan, up 59.66% year on year. 24Q1 steadily recovered from a low base, and a gradual recovery in overseas markets can be expected.
By business, domestic sales revenue increased 190% year-on-year to 107 million yuan in '23; the share of pet snacks in the product structure increased by 7.7 pcts. In '23, pet leashes had revenue of 370 million yuan, yoy -21.5%, of which 23H2YoY +15.6%, a significant improvement over the H1 decrease of -41.2%. Pet supplies gradually recovered from 23Q2, showing a positive trend; in '23, pet snack revenue was 473 million yuan, up 24.0%, H2YoY +38.1%, which accelerated growth from H1 +9.2%, and there was a clear upward trend in food.
Profitability rebounded month-on-month in 24Q1. The gross margin/net margin for '23 was 22.1%/14.7%, -2.0/-3.3pct year-on-year. The decline in gross margin was mainly affected by changes in business structure. 24Q1 gross margin/net profit margin 22.5%/17.1%, year-on-year -1.3/+4.9pct, month-on-month +1.1/+6.6pct. The 24Q1 sales/management/R&D/finance expense ratio was 2.8/3.5/1.7/ -3.6%, +0.9/-0.5/-1.0/-4.8pct year-on-year, respectively. This increased investment in domestic market expansion expenses, and interest income and exchange income increased year-on-year.
The pet supplies track has plenty of room to grow. According to the company's 23 annual report, the global pet products volume is 44.76 billion US dollars in '22, the 21-25 CAGR is expected to be 7.0%, and the scale will reach 54.83 billion US dollars in 25, of which the US and Western European markets will reach 25.33 billion US dollars and 12.31 billion US dollars respectively; in '25, the domestic pet products market will reach 48.4 billion yuan, driving the market to continue to expand.
Profit forecasting and investment advice. The company is a leading exporter of pet traction equipment, and has strong product design and industrialization capabilities. Overseas pets can be expected to gradually restore the durable consumption situation, orders are expected to pick up, benefit from the expansion and growth of global pet racetracks in the long term, and the company actively lays out the domestic market, and domestic sales are expected to accelerate. The estimated net profit for 24-26 years is 1.4/1.6/180 million yuan. Referring to comparable companies, the PE is 22 times in 24 years, corresponding to a reasonable value of 16.13 yuan/share, maintaining a “buy” rating.
Risk warning. Decline in overseas demand; changes in the international trade environment; exchange rate fluctuations; increased competition, etc.