In 2023, the company's net profit to mother was 233 million yuan, and the 24Q1 net profit was 56 million yuan. The company released the 2023 annual report and 2024 quarterly report: in 2023, the company achieved revenue of 3,747 million yuan, an increase of 15.4% over the previous year, and net profit to mother of 233 million yuan, an increase of 120.1% year on year. Among them, with 2023Q4, the company achieved revenue of 1,035 billion yuan, a year-on-year increase of 28.4%, and net profit of 56 million yuan to mother, turning a year-on-year loss into a profit. With 2024Q1, the company achieved revenue of 878 million yuan, an increase of 24.4% over the previous year, and net profit of 56 million yuan, an increase of 259.0% over the previous year. The year-on-year increase in performance was mainly due to a recovery in overseas OEM business, optimized product structure, and an increase in gross margin of processing plants.
Overseas OEM continues to resume, and the staple food business is growing at an impressive rate
By region, the company's main business revenue in 2023 was 2,533 billion yuan, up 12.9% year on year, with a gross profit margin of 25.2%, up 7.97 percentage points year on year, mainly due to a recovery in overseas orders and a drop in raw material prices combined with product structure optimization in overseas factories; the domestic business achieved revenue of 1,081 billion yuan, an increase of 20.2% year on year, and a gross profit margin of 31.3%, up 3.51 percentage points year on year, mainly due to lower raw material costs combined with the promotion of the company's value chain control.
By product, in 2023, the company achieved revenue of 2,351 billion yuan, up 9.8% year on year, gross profit margin of 25.4%, up 6.82 percentage points; canned pet revenue of 635 million yuan, up 5.8% year on year, gross profit margin increased 6.21 percentage points year on year; pet staple food revenue of 577 million yuan, up 60.2% year on year, gross profit margin of 29.1% year on year, up 8.61 percentage points year on year. The year-on-year increase in staple food business was mainly affected by the company's product structure optimization and brand strategic direction.
By sales model, in 2023, the company's pet food and supplies OEM business revenue was 2.53 billion yuan, up 14.5% year on year; distribution business achieved revenue of 1,121 billion yuan, up 8.7% year on year; and direct sales business achieved revenue of 339 million yuan, up 47.2% year on year.
Value chain management combined with product structure optimization. The company's profitability improved significantly. The company maintained a high investment in sales expenses for its core independent brands. Focusing on the development strategy of “focusing on the domestic market, focusing on staple foods, and focusing on its own brand”, the company's sales expenses in 2023 were 387 million yuan, up 27.7% year on year, and the sales expenses rate was 10.3%, up 1.0 percentage point year on year.
The company actively promotes gross margin optimization projects throughout the value chain. Through various strategies such as optimizing the brand's long-tail SKU, reducing low-margin products, improving supply chain efficiency, and strengthening cost and price control, the company's profitability has improved markedly.
Investment advice
The company is deeply involved in the domestic pet market and focuses on enhancing the brand image, market share and influence of its core independent brands. It is a high-quality enterprise in the domestic pet food industry. Along with the continuous recovery of the company's overseas business, the increase in the profitability of overseas factories, and the rapid development of its own brands in the domestic market, we expect the company to achieve main business revenue of 4.265 billion yuan, 4.886 billion yuan, and 5.632 billion yuan in 2024-2026 (4.371 billion yuan and 5.175 billion yuan before 2024-2025), an increase of 13.8%, 14.3% over the previous year. 15.5% (pre-2024-2025 value 16.3%, 18.4%), corresponding to net profit attributable to mother of 283 million yuan, 354 million yuan (pre-2024-2025 value of 272 million yuan, 332 million yuan), year-on-year increase of 21.3%, 25.4%, and 16.9% (pre-2024-2025 value 16.1%, 22.0%), corresponding to EPS 0.96 yuan, 1.21 yuan, and 1.41 yuan. Keep the “buy” rating unchanged.
Risk warning
Risk of exchange rate fluctuations; domestic market development falls short of expectations; production capacity investment falls short of expectations; raw material prices fluctuate; brand building falls short of expectations.