Incidents. The company released its 2023 annual report: in 2023, the company achieved total revenue of 26.485 billion yuan, a year-on-year decrease of 6.1%; net profit to mother was 967 million yuan, an increase of 168.2% year-on-year. Among them, the Q4 single-quarter company achieved total operating income of 5.821 billion yuan, a year-on-year decrease of 14.8%, and net profit to mother of 645 million yuan, compared to -09 billion yuan in the same period last year. At the same time, the 2023 profit distribution plan was announced: a cash dividend of 2.20 yuan (tax included) will be distributed for every 10 shares, and the dividend rate is 31.4%.
The company released its 2024 quarterly report: 24Q1 achieved total operating revenue of 6.417 billion yuan, a year-on-year decrease of 9.2%, and net profit to mother of 172 million yuan, a year-on-year decrease of 8.1%.
The performance of the liquid milk sector was under pressure, and Xinlite's revenue increased year over year. By product: The company's revenue in the dairy sector was -4.5% year over year, mainly due to the slowing down of the industry's growth rate and intense market competition. Among them, liquid milk revenue was -2.8%, which we think or dragged down the performance of low-temperature liquid milk due to poor consumption recovery; revenue from other dairy products -8.0%; revenue from animal husbandry products was -33.5% year over year, mainly due to the decline in revenue from animal husbandry products such as feed due to unbalanced supply and demand in the industry; revenue from other main businesses was +24.8%. We think it may be related to the growth of the quick-frozen business for new products such as ice cream. 24Q1 Dairy/Animal Husbandry Products/Other Main Businesses were -8.6%/-0.7%/-26.7% year-on-year respectively. By region: Shanghai/overseas/overseas revenue was -4.1%/-13.3%/+5.9% year-on-year, respectively, and -10.9%/-16.1%/+5.6% year-on-year in 24Q1. In terms of overseas business, the sales volume of the New Zealand Sunlight Baby Formula and Industrial Milk Powder business performed well, with revenue +6.4% YoY to 7.361 billion yuan in 23 years. Channel by channel: Direct sales and distribution channel revenue in '23 was -17.6%/-10.9% year-on-year, respectively, and -1.9%/-7.1% year-on-year in 24Q1, respectively. The company's channels continued to sink, with a net increase of 344 to 4,403 dealers in 23, with Shanghai/overseas dealers growing 5/339 to 461/3942 respectively.
Declining costs and product structure optimization boosted the 23-year gross profit margin. The company's gross margin was +1.00pct yoy to 19.7% in '23. We think it may be due to declining raw milk costs and product structure optimization. Among them, the gross margin of the dairy/animal husbandry sector was +0.87pct/+2.93pct year over year, respectively; gross margin of other businesses was 12.69pct yoy, mainly due to an increase in the share of revenue from third parties with lower gross margins. In 24Q1, the company's gross margin was -0.32pct year-on-year to 19.6%.
Expense rates remained stable during the period, and land collection and storage contributed to an improvement in net profit. The company's expense ratio remained stable during the 23-year period, +0.29pct to 16.6%. Among them, sales/management/R&D/finance expenses rates were -0.30pct/+0.23pct/+0.03pct to 12.0%/3.3%/0.3%/0.9%, respectively. The decrease in the sales expense ratio was mainly due to the advertising/marketing market expense ratio of -0.62 pct/-0.35 pct year on year. The 24Q1 company's expense ratio was +0.18pct year over year, with sales/management/ R&D/finance expenses ratios of -0.26pct/+0.10pct/+0.03pct/+0.30pct, respectively. Benefiting from the year-on-year decrease in land compensation revenue and sales expense ratios confirmed by the company in December 23, the company's net profit margin was +2.37pct to 3.7% year over year (+0.74pct to 2.0% year over year after excluding the impact of land compensation), of which the net profit margin for 23Q4 was 11.1%, compared to -0.1% for the same period last year. In 24Q1, the company's net profit margin was +0.03pct to 2.7% year on year, mainly benefiting from Sunlight's confirmation of deferred income tax assets. The company's actual income tax rate was -14.10pct to 4.7% year over year.
Profit forecasting and investment advice. We expect the company's 2024-26 EPS to be 0.42, 0.45, and 0.47 yuan/share, respectively. Referring to comparable company valuations, we gave the company 20-25 times P/E in 2024, corresponding to a reasonable value range of 8.35-10.43 yuan, maintaining a “superior to the market” rating.
Risk warning. Prices of raw materials fluctuated greatly, industry competition intensified, etc.