Incident: The company released its annual report for the year 23 and the quarterly report for '24, and achieved net profit of 125.76 billion yuan/10.43 billion yuan/10.03 billion yuan in 23, respectively, +2.5%/+10.6%/+16.8% year-on-year, respectively; achieved revenue/net profit attributable to mother/ net profit of 32.46 billion yuan/5.92 billion yuan/3.73 billion yuan, respectively, in the first quarter of '24.
Maintaining steady development under pressure from the core business. Liquid milk revenue increased slightly by 0.72% in '23, reaching a record high of 85.54 billion yuan, with a retail market share of 31.6%, ranking first in the market segment. Among them, retail sales of Jindian Organic Pure Milk series maintained double-digit growth, with retail sales of Jindian Fresh Milk increasing 54.6% year on year; gross margin of liquid milk +1.3 pct to 30.4% in '23. Revenue from milk powder and dairy products was +5.1% to 27.6 billion yuan, and gross margin decreased by 2.9 pct to 38.1%. Among them, the retail market share of infant formula increased by 1.6 pct to 16.2%, leading the growth rate in the market segment; the retail market share of adult milk powder was 23.3%, ranking first in the market, and it was the first in China to develop functional dairy products to improve blood sugar problems for middle-aged and elderly people. Against the backdrop of weak consumption recovery in 23, the company's two core businesses maintained steady development, which strongly supported the company's basic market. Cold drink revenue +11.7% to 10.69 billion yuan, further increasing its share in the company. The market share is stable and the growth rate far exceeds the industry level.
Lay out the “Big Health” industry to actively innovate, explore overseas markets, and jointly drive performance growth. The company has developed representative innovative products in various product lines such as “Jindian” pure milk and “An Muxi” probiotic yogurt. The innovative categories contributed 16.8% to the company's revenue; in 23 years, 144 domestic and foreign invention patents were authorized, and a total of 838 were obtained. The company is also actively exploring overseas markets, building 81 production bases around the world, with products covering more than 60 countries and regions; optimizing overseas production capacity, Westland Dairy's lactoferrin plant was put into operation in May '23, and related production capacity reached the top three in the world; and +10.1% of overseas business revenue in '23. The net profit margin growth rate of the 24Q1 company far exceeded the revenue growth rate, mainly due to the current investment income of 2.58 billion yuan and a loss of 25 million yuan in the previous period. The net profit growth rate after deduction was 8%, mainly benefiting from the increase in gross margin.
Profit forecast: Optimistic about the company's leading position in the dairy industry. The company's EPS for 24-26 is 2.05/1.99/2.16 yuan respectively, maintaining a “buy” rating.
Risk warning: risk of fluctuations in raw milk prices, risk of policy adjustments, worsening market competition, food safety risks.