Description of the event
In 2023, New Dairy achieved total operating income of 10.987 billion yuan (+9.8% YoY), net profit of 431 million yuan (YoY +19.27%), net profit of 465 million yuan (YoY +57.86%); looking at 2023Q4 alone, the company achieved total operating income of 2,793 billion yuan (+10.56% YoY) and net profit to mother of 49.47 million yuan (-2.09% YoY), net profit of 73.634 million yuan (YoY +56.56%). In 24Q1, the company achieved total operating income of 2,614 billion yuan (YoY +3.66%); net profit to mother of 897.482 million yuan (YoY +46.93%), after deducting non-net profit of 100 million yuan (YoY +33.75%).
Incident comments
Fresh milk led growth and continued structural optimization, and the “one yogurt cow” output disrupted Q1 revenue growth. In 2023, the company's liquid milk and dairy manufacturing industry was 9.834 billion yuan (+11.16% year over year), of which volume increased 9.3%, price increased 1.7%, liquid milk was 9.755 billion yuan (+11.15% year over year); milk powder was 79 million yuan (+11.28% year over year); and other business was 1,153 billion yuan (-0.53% year over year). High-end fresh milk, represented by Vipshop, continues to lead growth, and the trend of structural optimization continues. Looking at 2023 by region: Southwest China RMB 4,095 billion (YoY +9.98%), East China (+4.8% YoY), North China RMB 1,109 billion (YoY +39.03%), Northwest China RMB 1,424 billion (YoY +0.97%), and other regions RMB 1,339 billion (YoY +14.9%). Looking at 2024Q1 alone, the decline in revenue growth is mainly due to the fact that industry demand is still relatively weak, but the company's fresh milk products continued to lead the growth. The apparent revenue growth rate was also affected by the release of “One Yogurt Cow” at the end of the previous year. After restoration, revenue growth is expected to maintain steady growth, or be superior to the overall performance of the dairy industry.
Costs driven by falling milk prices have improved and optimized gross profit margins, but costs have also increased. In 2023, the company's net profit margin increased 0.31pct to 3.92% year on year, gross margin +2.84pct to 26.87% year on year, and the period expense ratio was +1.26pct to 21.46% year on year. Detailed changes include: sales expenses ratio (+1.72 pct year over year) and management expenses ratio (-0.42 pct year over year).
Looking at 2023Q4 alone, the company's net profit margin fell 0.23 pct to 1.79% year on year, gross margin was +3.52 pct year on year to 25.25%, and the period expense ratio was +3.9 pct year on year to 22.47% year on year. Among them, detailed changes: sales expense ratio (+3.81 pct year over year) and management expense ratio (-0.18 pct year over year). Looking at 2024Q1 alone, the company's net profit margin increased 1.01 pct to 3.43% year on year, gross margin +2.32 pct to 29.38% year on year, and the period expense ratio was +1.64 pct year on year to 23.6% year on year. Detailed changes: sales expenses ratio (+1.59 pct year over year) and management expenses ratio (+0.67 pct year over year). In the context of the decline in raw milk, the cost-side (gross profit margin) benefits continued, but sales expenses also increased (including public investment and direct consumer promotion).
The company continues to focus on the “fresh cube” strategy and maintains strategic strength in the dimensions of high-end product innovation and direct consumer access. The product side adheres to the “fresh and sour double strength” development strategy, leading the high-quality growth of the low temperature category. The “24 hour” category was high-end, and high-end products grew by nearly 40% year on year; “Today's Fresh Milk Shop” upgraded “thick” milk with high calcium, with a year-on-year increase of more than 150%. In 2023, the company's new product revenue accounted for 12%, making it a new growth engine. In 2023, the company's “Fresh Go” platform sold more than 2 million orders per year, an increase of more than 20% over the previous year. The number of users exceeded 19 million, an increase of nearly 50%, strengthening the support for the overall business. Looking ahead to 2024, the company is expected to maintain a relatively rapid revenue growth trend while improving profitability at an accelerated pace compared to the same period. The estimated net profit from 2024 to 2025 is 562/711 million yuan, corresponding to 17/13 times the PE valuation, maintaining the “buy” rating.
Risk warning
1. Risk of slow recovery in demand; 2. Industry competition further exacerbates risks; 3. Risk of changes in consumer consumption habits; 4. Risk that prices of some raw materials will continue to rise, etc.