incident. The company released its 2023 annual report: in 2023, the company achieved total revenue of 10.987 billion yuan, an increase of 9.8%; net profit to mother was 431 million yuan, an increase of 19.3% year on year. Among them, the Q4 single quarter achieved total operating income of 2,793 billion yuan, an increase of 10.6% year on year, and net profit to mother of 50 million yuan, down 2.1% year on year. At the same time, the 2023 profit distribution plan was announced: a cash dividend of 1.50 yuan (tax included) will be distributed for every 10 shares, and the dividend rate is 30.1%.
The company released its 2024 quarterly report: 24Q1 achieved total operating revenue of 2,614 billion yuan, an increase of 3.7% year on year; net profit to mother was 90 million yuan, an increase of 46.9% year on year.
Firmly strengthen the core business, and new products drive impressive growth. By product: In '23, the company's liquid milk and dairy manufacturing industry achieved steady growth, with revenue +11.2% (volume +9.3%, price +1.7%), with liquid milk/milk powder revenue +11.2%/+11.3%, respectively. In '23, the company continued to deepen the “Fresh Cube Strategy”, strengthen its core business, and achieve growth beyond the industry market. Among them, new product revenue accounted for 12%, maintaining double digits for three consecutive years: 1) Low-temperature fresh: the company's fresh milk increased by double digits year on year, and its market share further increased. Among them, the “24 Hour” high-end series increased nearly 40% year over year, and “Today's Fresh Milk Shop” upgraded “thick” milk doubled year on year. 2) Low temperature acid: The company focuses on developing specialty low temperature yogurt, and the “Active Crystal Ball” product has been iteratively upgraded 1000+ times. 3) Room temperature milk: In '23, the company added 7 bottles of room temperature organic milk, which increased by more than 50% year-on-year throughout the year, and the high-end “Australia” series increased nearly 40% year over year. 24Q1's total revenue increased 3.7% year-on-year to 2,614 billion yuan. We believe that the slowdown in growth was mainly affected by the divestment of Chongqing Hanhong (a yogurt cow).
The North China market grew rapidly year on year, and the channel network was expanding steadily. By region: Revenue in North China was +39.0% year-on-year in '23. We think it may be related to the lower base for the same period last year. Southwest China/East China/Northwest China revenue was +10.0%/+4.8%/-1.0%, respectively. Channel division: The company's direct sales/distribution channels were +10.2%/+12.4%, respectively, and the revenue share was +0.19pct/+0.90pct to 50.9%/38.6% year-on-year, respectively. In '23, the company developed and expanded markets in Guangdong, Hainan, Guangxi, etc., with a net increase of 148 to 3,409 dealers.
Gross margin increased year over year, and net profit margin increased significantly. The gross margin of the 23/24Q1 company was +2.84pct/+2.32pct to 26.9%/29.4%, respectively. We believe the main reason is the continued decline in raw milk prices and the structural upgrading of products. By product, the gross margin of liquid milk/milk powder/other businesses in '23 was +2.70pct/+4.15pct/+2.08pct, respectively. The cost rate for the 23-year company period was +1.26pct, of which the sales expense ratio was +1.72pct, mainly the advertising/promotion expense ratio was +0.80pct/+0.69pct, respectively; management/R&D cost rates were -0.42pct/-0.05pct to 4.3%/0.4%, respectively; the 24q1 period/sales/management/R&D expense ratio was +1.64pct/+1.59pct/+0.67pct/ -0.08pct, respectively.
Benefiting from the increase in gross margin, net profit margins after deducting non-return to mother were +1.29pct/+0.86pct to 4.2%/3.8% year-on-year, respectively.
Profit forecasting and investment advice. We expect the company's 2024-2026 EPS to be 0.69, 0.83, and 0.95 yuan/share, respectively. Referring to comparable company valuations, we gave the company 16-20 times PE in 2024, with a corresponding reasonable value range of 11.09-13.86 yuan, maintaining a “superior to the market” rating.
Risk warning. Fluctuating raw material costs, increased industry competition, food safety issues