occurrences
The company announced the 2023 Annual Report and 2024 Quarterly Report. In '23, the company achieved total revenue of 26.485 billion yuan, -6.13% year-on-year, net profit to mother of 967 million yuan, +168.19% year-on-year, and net profit of non-return to mother of 523 million yuan, +210.07% year-on-year. In 23Q4, the company achieved total revenue of 5.821 billion yuan, a year-on-year net profit of -14.77%, and a net profit of 645 million yuan to the mother, which reversed the year-on-year loss, after deducting net profit of 211 million yuan. In 24Q1, the company achieved total revenue of 6.417 billion yuan, -9.25% year-on-year, net profit to mother of 172 million yuan, -8.07% year-on-year, and net profit of 186 million yuan after deduction of non-return to mother, +6.20% year-on-year. The company plans to pay a cash dividend of 0.22 yuan (tax included) per share, with a dividend rate of 31.35%.
Revenue was temporarily under pressure, and the year-on-year decline in liquid milk in Q1 narrowed month-on-month
1) The year-on-year decline in 24Q1 liquid milk narrowed month-on-month, and revenue from other dairy products increased slightly. The company's revenue for liquid milk/other dairy/animal husbandry products/other products in '23 was 156.48/73.59/17.57/1,384 billion yuan, -2.75%/-8.02%/-33.47%/+24.75% year-on-year, and the revenue side was temporarily under pressure. In 23Q4, the revenue of the above categories of products was -14.24%/-15.55%/-48.10%/+20.29%. In 24Q1, liquid milk/other dairy/animal husbandry products/other products achieved revenue of 35.14/21.73/4.72/245 million yuan, -13.68%/+0.96%/-0.69%/-26.71% year-on-year, and the growth rate of liquid milk/other dairy products was +0.56/+16.51pct month-on-month.
2) Shanghai and overseas countries are temporarily under pressure, and overseas revenue is growing. In '23, the company's revenue in Shanghai/overseas/overseas was 71.12/117.15/7.321 billion yuan, respectively, -4.13%/-13.30%/+5.95% year-on-year. In 23Q4, revenue in the above regions was -19.18%/-34.59%/+15.83% year-on-year. In 24Q1, Shanghai/overseas/overseas revenue was 1,736/27.02/19.67 billion yuan respectively, -10.95%/-16.15%/+5.64% year-on-year.
3) The decline in dealer channel revenue was less than that of direct sales channels. In '23, the company's direct operation/distributor/other channel revenue was $59.04/201.33/110 million yuan, respectively, -17.65%/-1.92%/-23.22% year-on-year. In 23Q4, revenue from the above channels was -36.48%/-10.09%/-41.81% year-on-year. In 24Q1, the company's direct management/distributor/other channel revenue was 1,383/49.61 billion yuan, -15.67%/-7.15%/+19.77% year-on-year.
Q1 Net interest rate is temporarily under pressure
1) Net margin and gross margin increased in '23. The net interest rate/gross margin of the company in '23 was 3.14%/19.66%, respectively, +1.75/+1.01pct. The increase in net margin was mainly due to a fall in milk prices and an increase in gross margin, and asset disposal revenue as a share of +1.57pct of revenue due to land disposal; the total cost ratio for the period was +0.30pct, and asset impairment losses accounted for +0.70pct of revenue, mainly due to the milk powder division's long-term asset group reduction preparation.
2) Net margin and gross margin declined temporarily in 24Q1. In 24Q1, the company's net margin/gross margin was 2.33%/19.64%, respectively, -1.06/-0.32pct. The total cost ratio for the period was +0.19pct year over year, asset impairment losses accounted for +0.43pct, and net non-operating income and expenditure accounted for -0.50pct.
Investment advice
We expect the company's net profit to be 585/6.33/667 million yuan in 2024/2025/2026, respectively, with a growth rate of -39.52%/8.23%/5.26%, corresponding to 21/20/19 times PE on May 8 (market value of 12.4 billion yuan), maintaining the “buy” rating.
Risk warning
Food safety risks, raw milk price fluctuation risks, terminal demand falling short of expectations.