Incident: The company released the 2023 report and the 2024 quarterly report. In 2023, it achieved total operating revenue of 126.2 billion yuan, a year-on-year increase of 2.4%, and realized net profit of 10.43 billion yuan, an increase of 10.6% over the previous year; in 2024Q1, total operating income of 32.6 billion yuan, a year-on-year decrease of 2.6%, and realized a net profit of 5.92 billion yuan, an increase of 63.8% over the previous year. In addition, the company plans to distribute a cash dividend of 12.00 yuan (tax included) for every 10 shares to all shareholders.
24Q1 actively controlled the pace, and the revenue side declined in the short term. In 2023, liquid milk, milk powder, dairy products, and cold drink products achieved operating revenue of 85.5 billion yuan (+0.7%), 27.6 billion yuan (+5.1%), and 10.7 billion yuan (+11.7%); 2024Q1 liquid milk, milk powder, dairy products, and cold drink products achieved revenue of 203 billion yuan (-6.8%), 7.4 billion yuan (-0.2%), and 4.3 billion yuan (+14.2%) respectively. 1) Liquid milk: The retail market share of liquid milk has steadily ranked first in the industry, and basic white milk is growing faster than the industry. 2) Milk powder: In 2023, the retail sales share of the company's infant formula reached 16.2%, an increase of 1.6 pp. Using “nutrition+function” as a breakthrough point, we launched functional dairy products suitable for middle-aged and elderly people. 3) Cold drinks: The growth rate far exceeds the industry, ranking first in the market.
Profitability continues to improve. 1. In 2023, 2024Q1 gross margins were 32.6% (+0.3pp) and 35.8% (+2pp), respectively, mainly due to declining raw milk prices. 2. The sales expense ratio and management expense ratio in 2023 were 17.9% (-0.7pp) and 4.1% (-0.3pp), respectively; the 2024Q1 sales expense ratio and management expense ratio were 18.4% (+1.4pp) and 4.5% (+0.3pp), respectively, increasing expenses during the peak season. 3. In 2023, 2024Q1 net interest rates were 8.2% (+0.6pp) and 18.3% (+7.5pp), respectively. Affected by the transfer of subsidiary shares increased investment income, the 2024Q1 net interest rate increased significantly.
Profitability increases can be expected, and repurchases will improve investor returns. 1. As the cost side stabilizes, the superposition of the product structure improves, and the efficiency of cost investment increases, the company's profitability will gradually increase. 2. The company grasps scarce animal husbandry resources through participation holdings+strategic cooperation, and has sufficient distribution of high-quality milk sources. Gather upstream animal husbandry enterprises, cooperate with large-scale ranching, and lead the industry in scale and level of farming; develop customized ranch management systems to introduce digitalization into upstream animal husbandry to make dairy farming more efficient. 3. The company plans to use its own funds to repurchase shares of 1-2 billion yuan within 12 months, which will be used to cancel and reduce registered capital in accordance with the law, showing the company's confidence in future development and effectively improving investor returns.
Profit forecasting and investment advice. Net profit due to mother in 2024-2026 is estimated to be 13 billion yuan, 13.2 billion yuan, and 13.9 billion yuan for EPS, 2.04 yuan, 2.07 yuan, and 2.18 yuan respectively. The corresponding dynamic PE is 14 times, 14 times, and 13 times, respectively, maintaining a “buy” rating.
Risk warning: risk that raw milk prices will continue to rise; industry competition increases risk; food safety risk.