Incidents:
The company announced total revenue/net profit to mother in 2023 of 126.179/10.429 billion yuan, +2.44%/+10.58% year-on-year; corresponding to 23Q4 total revenue/net profit to mother of 287.75/1,048 billion yuan, a year-on-year decrease of 1.82%/23.47%. 24Q1 The company's total revenue/ net profit attributable to mothers/ net profit after deducting non-net profit was 325.77/59.23/37.28 billion yuan, up -2.58%/63.84%/12.39% year-on-year. 24Q1 revenue fell slightly short of expectations, and net profit margins exceeded expectations.
Revenue: Liquid milk products are slowly being upgraded
In 2023, the company's liquid milk/milk powder/cold drink revenue increased by 0.72%/5.09%/11.72% year-on-year. Looking at the volume and price of liquid milk split, liquid milk sales/structural changes/average price changes contributed 2.56%/0.25%/-2.09% respectively in 2023. We believe that the liquid milk product structure is still slowly being upgraded, but poor demand has led to strong promotions. 24Q1 The company's revenue for liquid milk/milk powder/cold drink changed -6.81%/-0.20%/+14.21% year-on-year. We believe that (1) In the off-season of liquid milk after the Spring Festival, in the face of weak terminal sales and a slightly higher share of big date products, the company took the initiative to adjust channels to affect shipments, and expected a slight year-on-year increase in liquid milk revenue; judging from the structure, Jindian is superior to basic white milk, and white milk is superior to yogurt. (2) Milk powder: Infant powder is expected to return to normal growth in 24Q2, and adult powder is expected to continue to grow year on year.
Profitability: Benefit from cost dividends and category upgrades
In 2023, the company's net interest rate increased 0.59pct year-on-year to 8.18%, mainly benefiting from cost dividends and category structure improvements. In 24Q1, the company's deducted non-net interest rate increased by 1.53pct year-on-year to 11.48%. Net interest rate increases were achieved even when powder spraying was reduced and cost investment increased, mainly due to raw material cost dividends and category structure upgrades.
Dividends+Buybacks: Increase return on investment
(1) Dividends: The company's cash dividend ratio in 2023 is 79.94%. The company's dividend ratio is expected to maintain 70% + in the future. (2) Repurchase: The company plans to repurchase 1-2 billion yuan, with a repurchase price of no more than 41.88 yuan/share. All of them will be cancelled and the registered capital of the company will be reduced.
Profit Forecasts, Valuations, and Ratings
Based on factors such as increased competition and continued cost dividends, we expect the company's total revenue to 2024-2026 to be 1295.87/1350.88/139.633 billion yuan, up 3.04%/4.25%/3.36% year on year; net profit to mother of 130.66/127.59/13.752 billion yuan, up 25.29%/-2.35%/7.78% year on year, and a 3-year CAGR of 9.66%. Referring to comparable company valuations, we gave the company 18.07 times PE in 2024, with a target price of 37.08 yuan, maintaining a “buy” rating.
Risk warning: Fresh milk prices fluctuate, new product promotion falls short of expectations, consumption recovery falls short of expectations