Event: Company releases 2024 mid-year report:
2024H1: The company achieved revenue of 1.99 billion yuan, +28.85% year over year; net profit to mother 0.154 billion yuan, +52.66% year over year; deducted non-net profit of 0.154 billion yuan, +55.48% year over year.
2024Q2: The company achieved revenue of 1.039 billion yuan, +23.29% YoY; net profit to mother 0.091 billion yuan, +27.38% YoY; deducted non-net profit of 0.09 billion yuan, +21.18% YoY.
Q2 Revenue growth continued at a steady pace, and demand in the Americas remained strong. By product, by product: 24H1 softgels, tablets, powders, gummies, drinks, hard capsules, and other dosage forms achieved revenue of 8.89/1.42/4.86/0.14/0.098/0.08 billion yuan, +26.8%/-17.5%/+13.29%/+60.55%/-14.36%/+70.16%/+315.23%. Drinks are affected by individual customer orders, and revenue is expected to improve in the future. Looking at the subregions, 24H1 China/America/ Europe/ other regions achieved revenue of 8.32/0.729/0.295/0.136 billion yuan respectively, +4.22%/+65.42%/+13.78%/+185.71% compared with the same period last year. According to the company's exchange and feedback, the company's revenue in China accelerated in 24Q2 and achieved high single-digit growth; the American region achieved 30% + revenue growth, and demand remained strong; the European region maintained high double-digit growth; and the Asia-Pacific region maintained more than double growth.
The profit margin of the endogenous business is relatively stable, and BF can be expected to reduce losses in the second half of the year. The company's 24Q2 net profit margin was 8.8%, +0.28pct year over year and +2.18pct month on month. Among them, the gross profit margin was 33.35%, +2.41 pct year over month, and +2.73 pct month-on-month. The increase in gross margin of endogenous business was mainly due to continuous internal lean production, increased service revenue, and product structure upgrades; BF gross margin also increased along with scale release and technology optimization. 24Q2 sales/management/finance/R&D expense rates were 7.97%/10.17%/2.16%/3.51%, respectively, +0.6/+0.4/+1.4/+0.7pct. The Q2 endogenous net interest rate remained at double digits year on year. The profit and loss of minority shareholders was -0.094 billion yuan in 24Q2. Considering that BF still had a loss, the main impact was on depreciation and amortization expenses of the fondant and personal care production line. At the same time, it is expected that BF will turn a loss into a profit in the second half of the year.
Profit forecast and investment rating: Xianle Health is a leading health product CDMO company. Demand recovered after the American storage phase ended. The medium- to long-term company R&D and production side advantages have accumulated sufficient, and the leading position is expected to continue to rise. Overall, there is still sufficient confidence in the incentive target of a 20% increase in annual revenue and 0.4 billion yuan in performance (excluding equity incentive fees). We maintain the previous profit forecast. The company's revenue for 2024-2026 is 4.35/5.01/5.66 billion yuan, respectively, up 21%/15%/13% year over year, and the net profit to mother is 0.402/0.477/0.587 billion yuan, respectively, up 43%/19%/23% year over year, EPS is 1.7/2.02/2.49 yuan respectively, and corresponding PE is 14x, 12x, and 9x, maintaining a “buy” rating.
Risk warning: risk of raw material price fluctuations, risk of capacity investment and indigestion of expectations, food safety risks.