Event: The company released its 2023 annual report and 2024 quarterly report.
Comment:
The wrong delivery schedule during the Spring Festival disrupted the company's 2023Q4 performance. Demand for dairy products recovered weakly in 2023, and the company achieved total operating revenue of 126.179 billion yuan in 2023, an increase of 2.44% year on year; net profit to mother of 10.429 billion yuan, an increase of 10.58% year on year. Due to the late Spring Festival this year, the company's 2023Q4 performance declined due to the late Spring Festival preparation schedule. In the fourth quarter of 2023, the company achieved total revenue of 28.775 billion yuan, a year-on-year decrease of 1.82%; realized net profit to mother of 1,048 billion yuan, a year-on-year decrease of 23.47%. By product, in 2023, the company's liquid milk/milk powder and dairy/cold drink products achieved operating revenue of 85.40 billion yuan/27.598 billion yuan/10.688 billion yuan respectively, +0.72%/+5.09%/+11.72% year-on-year respectively.
Demand for the company's products continued to recover weakly in 2024Q1, and the sale of coal subsidiaries increased profits. The company's sales performance during the Spring Festival was good this year, and off-season demand declined sequentially after the March Festival. With 2024Q1, the company achieved total revenue of 32.577 billion yuan, a year-on-year decrease of 2.58%; realized net profit to mother of 5.923 billion yuan, an increase of 63.84% over the previous year. The company's net profit to mother achieved a relatively rapid increase, mainly because the company sold coal subsidiaries to increase investment income. Excluding this item, the 2024Q1 net profit deducted from non-return to mother was 3,728 billion yuan, an increase of 7.97% over the previous year. By product, 2024Q1's liquid milk/milk powder and dairy/cold drink products achieved operating revenue of 20.061 billion yuan/7.428 billion yuan/4.333 billion yuan/198 million yuan respectively, -6.8%/-0.2%/+14.2% year-on-year respectively.
The company's profit level increased in 2024Q1. Benefiting from product structure optimization combined with declining raw material costs such as fresh milk, the company achieved a gross profit margin of 32.58% in 2023, an increase of 0.32 percentage points over the previous year; sales expenses ratio/management expense ratio/financial expense ratios were 17.89%/4.08%/-0.12%, respectively, down 0.71 pct/down 0.26 pct/0.09 pct, respectively. Based on gross margin and expense ratios, the company achieved a net profit margin of 8.18% in 2023, an increase of 0.59 percentage points over the previous year. In the first quarter of this year, fresh milk continued to decline, compounding the company's sales of coal subsidiaries to increase its performance. The company achieved a gross profit margin of 35.79% in 2024Q1, an increase of 2.02 percentage points over the previous year; sales expenses ratio/management expense ratio/financial expense ratios were 18.45%/4.47%/-0.81%, respectively, up 1.38 pct/0.28 pct/ down 0.61 pcts year on year. Based on gross margin and expense ratios, the company achieved a net profit margin of 18.34% in 2024Q1, an increase of 7.49 percentage points over the previous year.
Maintain a buy rating. The company's earnings per share in 2024/2025 are estimated to be 2.02 yuan and 1.98 yuan, respectively, and the corresponding PE valuation is 14 times and 14 times, respectively. Along with the steady progress of product structure upgrades and reforms, it is expected that there will be some room for future growth in the company's performance. Maintain the company's “buy” rating.
Risk warning. Product promotion falls short of expectations, channel expansion falls short of expectations, industry competition intensifies, macroeconomic fluctuations, etc.