On April 29, 2024, Liziyuan released its 2024 quarterly report.
Key points of investment
Profit was slightly lower than expected, and expense ratios increased
Q1 Revenue was in line with expectations, and profit was slightly lower than expected. 2024Q1's total revenue was 334 million yuan (3.17% decrease), net profit attributable to mother was 57 million yuan (same decrease of 3.79%), and net profit after deducting non-return to mother was 59 million yuan (same increase of 1.65%). The cost dividend led to an increase in gross margin, and net interest rates remained stable. 2024Q1 gross margin/net margin was 38.19%/17.03%, respectively, +1.57/-0.11pcts year-on-year, respectively. The management expense ratio has increased significantly, and the sales expense ratio has been continuously optimized. 2024Q1 sales/management/finance expense ratios were -0.92/+2.07/-1.58pcts, respectively. Cash flow was under slight pressure, and repayment performance was in line with the rhythm. 2024Q1 net operating cash flow of $81 million (same decrease of 22.86%); sales repayment of $377 million (decrease of 3.30%), which is basically in line with revenue performance.
E-commerce performed well, with revenue rising steadily in south-west China
The performance of dairy drinks was slightly under pressure, and the growth rate of other beverages increased. 2024Q1 dairy drinks/ other revenue was $324/09 million, -4.37%/+77.47%, respectively, accounting for -1.19/+1.19pcts year-on-year. North China and Northeast China are clearly under pressure. East and South China have maintained steady growth, and e-commerce is performing well. 2024Q1 e-commerce revenue was 1.69/0.66/0.62/0.05/0.18/0.02/0.02/0.02/0.02/0.02/0.09 billion, respectively, in East China/Central China/ Southwest China/ 1.75%/-14.74%/+4.05%/-91.24%/-10.80%/-94.34%/-32.64%/+8.59%, respectively. Direct sales channels are growing rapidly, and distribution channels are under slight pressure.
2024Q1 distribution/ direct sales revenue was 326/0.07 million yuan respectively, -3.52%/+14.08% respectively. By the end of 2024Q1, the company had 2,627 dealers, a net increase of 42 over the beginning of the year.
Profit forecasting
We are optimistic that the company will renew its brand as a sweet milk leader, increase its share of investment in breakfast and small dining channels, increase the share of national expansion, boost confidence, and have sufficient momentum for long-term growth. According to the first quarterly report, we adjusted the company's 2024-2026 EPS to 0.69/0.78/0.91 yuan (previous value was 0.72/0.86/1.04), respectively, and the current stock price corresponding PE was 18/16/14 times, respectively, maintaining a “buy” investment rating.
Risk warning
Macroeconomic downside risks, new product promotion falling short of expectations, risk of a sharp rise in raw materials, falling short of expectations in production capacity investment, single product risk, etc.