Introduction to this report:
The 24Q1 company's performance exceeded expectations, mainly due to a significant recovery in revenue from overseas customers and a recovery in gross margin. Subsequent major overseas customers and new HMO product expansion are expected to help medium- to long-term growth.
Key points of investment:
The investment proposal considers that overseas revenue in 2023 is lower than previously expected, the company's new production capacity switch in 24, and increased domestic market competition. Based on prudential principles, the company is expected to have an EPS of 0.68 (-0.21) /0.84 (-0.3) /0.97 yuan in 2024-2026, referring to peer valuation and considering that the company's compound growth rate is slightly lower than that of peers, and give the 2024 PE30x, lowering the target price to 20.4 (-6.3) yuan to maintain the “gain” rating.
Q1 Exceeded expectations, and gross margin improved markedly. In 2023, the company's revenue, return to mother, non-net profit of 4.44, 0.91, 62 million yuan +2%, +103%; 24Q1 revenue, return to mother, deduction of 1.17, 0.24, and 0.19 billion yuan YoY +33%, +70%, and +158%. The performance exceeded expectations, due to a significant recovery in revenue from overseas customers, driving gross margin recovery. The 24Q1 gross profit margin was 40.49% YoY +2.13pct, mainly due to the high increase in orders from overseas customers with high gross margins, and the Q1 net interest rate of 20.23% YoY +4.81pct, due to the increase in gross margin and a decrease in the rate of equity incentives and management expenses.
The release of orders from overseas customers is expected to drive an improvement in the company's revenue and profit. Revenue of 2023DHA, ARA, SA, and other products was +23%, +18%, -33%, and -51% year-on-year; in 2023, overseas and domestic revenue was -4% and +17% year-on-year. Domestic beneficiaries of new GB orders, and overseas players affected demand due to delays in the registration of the new GB for small and medium-sized customers. The high increase in 24Q1 benefits from overseas recovery. Overseas revenue is expected to grow rapidly throughout the year, with overseas small and medium-sized customers recovering and starting up large customers, leading to improved profits.
HMO raw materials have been approved domestically, and the company's product reserves are expected to contribute new growth points in the future. The HMO raw materials 2'-FL and LnnT have been approved as food nutrition enhancers domestically. The company's 2'-FL products have completed pilot testing and production capacity construction, and are expected to open up room for growth after subsequent declarations are passed.
Risk warning: loss of customers, new customer expansion falling short of expectations, new product development falling short of expectations.