Incident: 1) The company released its 2023 annual report, achieving net profit of 125.76 billion yuan, +2.5% year over year, achieving net profit of 10.43 billion yuan, and net profit without return to mother of 10.03 billion yuan, +16.8% year over year; of these, 23Q4 achieved revenue of 28.67 billion yuan, -1.8% year on year, realized net profit of 1.05 billion yuan, -23.5% year on year; 2) The company released 2024 According to the first quarter report, 24Q1 achieved revenue of 32.46 billion yuan, -2.6% year-on-year, realized net profit of 5.92 billion yuan, or 63.8% year-on-year, and realized net profit after deduction of 3.73 billion yuan, or +8.0% year-on-year.
23 years ended steadily, 24Q1 actively adjusted the pace of shipment, and short-term pressure on revenue. Year 23: By product, the company's liquid milk, milk powder, dairy products, and cold drink products achieved revenue of 85.54 billion yuan, 27.60 billion yuan, and 10.69 billion yuan respectively, up 0.7%, 5.1%, and 11.7% year-on-year respectively; by region, North China, South China, Central China, East China and other regions achieved revenue of 33.94 billion yuan, 31.54 billion yuan, 19.31 billion yuan, 15.13 billion yuan, 15.13 billion yuan, respectively, year-on-year changes of +2.2%, +5.7%, +8.1%, -8.1%, and 5.3%. 24Q1: The company's liquid milk, milk powder, dairy products, and cold drink products achieved revenue of 20.26 billion yuan, 7.43 billion yuan, and 4.33 billion yuan respectively, with year-on-year changes of -6.8%, -0.2%, and 14.2%, respectively. Specifically, the year-on-year decline in liquid milk revenue was mainly affected by factors such as demand recovery and the company's adjusted shipping pace. The baby powder terminal sales were better than the revenue growth rate on the reporting side, while the cold drink business maintained relatively rapid growth.
Gross margin increased, channel adjustments increased investment, and overall profitability continued to increase. In '23, the company's gross margin was 32.6%, up 0.3 pct year on year. The sales expenses ratio and management expense ratio were 17.9% and 4.1% respectively, reducing 0.7 pct and 0.3 pct year on year, and finally achieving a net interest rate of 8.3% to mother, an increase of 0.6 pct year on year.
The 24Q1 company achieved a gross profit margin of 36.0%, +2.0pct year on year, mainly due to the low price of raw milk contributing cost dividends; the sales expense ratio and management expense ratio were 18.4% and 4.5%, respectively, and the year-on-year change was +1.4pct and 0.3pct, respectively. The increase in sales expense ratio was mainly due to increased marketing investment investment in product freshness management after the Spring Festival; in addition, the net profit from the transfer of subsidiary shares increased significantly to 18.2%, compared with the same period. +7.4%.
The business goals are steady, and high dividend rates and repurchases are conducive to increasing shareholder returns. According to the business plan disclosed in the company's annual report, the 24-year plan is to achieve revenue of 130 billion yuan, an estimated year-on-year increase of 3.0%, and the total planned profit is 14.7 billion yuan. We believe that the target is more steady. Looking at the breakdown, liquid milk is expected to stabilize in the second half of the year. The milk powder and dairy products business is expected to benefit from the increased concentration of the baby powder industry and the development of the adult nutrition industry, while the cold drink business is expected to maintain rapid growth; on the profit side, the product structure is expected to improve while the cost dividend continues during the year. An increase in gross margin can be expected, while sales expenses are rationalized, and overall profitability is expected to further improve. In terms of increasing shareholder returns, first, the company's dividend rate has not been less than 70% in the past 5 years, and the cash dividend rate for 2023 is 73.25%; second, the company plans to use its own capital to implement stock repurchases of 1-2 billion yuan. The repurchase of shares will be used to cancel and reduce registered capital in accordance with the law, reflecting confidence in future development and helping to protect investors' interests.
Investment advice: It is estimated that the main driving force of the company's revenue scale in the next two to three years will be the steady growth of liquid milk, the faster growth of milk powder to increase market share, and the continuous innovative growth of other dairy products such as cold drinks. Along with the steady increase in revenue scale, the company's increased profitability is also supported. At the same time, the company is forward-looking to lay out a new health food circuit and internationalization, and the non-dairy business is expected to contribute more results in the medium to long term. We expect the company's net profit to be 13.13 billion yuan, 12.40 billion yuan, and 13.56 billion yuan respectively, and EPS will be 2.06 yuan, 1.95 yuan, and 2.13 yuan respectively. The current stock price corresponding to the 24-26 valuation is 14 times, 15 times, and 13 times, respectively, maintaining a “buy” rating.
Risk warning: Industry competition intensifies, consumer demand recovery falls short of expectations, raw milk prices fluctuate, profit growth falls short of expectations, food safety risks.