Event: The company released its 2024 three-quarter report. According to the company's announcement, in the first three quarters of 2024, the company achieved total operating income of 8.15 billion yuan, a year-on-year decrease of 0.54%, and net profit to mother of 0.474 billion yuan, an increase of 24.4% over the previous year. Among them, 2024Q3 achieved total revenue of 2.785 billion yuan, a year-on-year decrease of 3.82%, and net profit to mother of 0.177 billion yuan, an increase of 22.9% year-on-year. The company's revenue and profit are in line with expectations.

Investment rating and valuation: Maintaining profit forecasts, the company's net profit from 2024 to 2026 is 5.15, 6.48, and 0.806 billion, with year-on-year increases of 19.6%, 25.9%, and 24.2%, respectively. The latest closing price corresponding to 24-26 PE is 20x, 16x, and 12x, respectively. The company vigorously develops the fresh milk business under its “fresh strategy”, and relies on mergers and acquisitions to form a “1+N” brand matrix and national fresh milk layout, and relies on New Hope Group to enjoy advantages in milk sources, cold chain, and channels. The company launched a new five-year strategy in 23, clarifying the goal of increasing profit margins. In the future, it will develop and iterate the low-temperature fresh milk and specialty yogurt business, build core user barriers through direct D-to-C channels, and achieve increased penetration through intensive regional cultivation. We believe that in the future, the company can continue to unleash endogenous growth potential and maintain an increase rating.

The main dairy industry performed steadily. 2024Q3's revenue fell 3.8% year on year. On the one hand, weak terminal demand since Q3 and fierce market competition had a certain impact on the company's revenue. On the other hand, the company sold a yogurt cow at the beginning of this year, leading to changes in the scope of consolidated statements, and other business revenue declines. We expect the dairy industry's main business to maintain a year-on-year growth trend despite the pressure.

Profitability continues to increase, and net interest rate improvements have been realized. 2024Q3 achieved a gross profit margin of 28.83%, an increase of 2.4 pct over the previous year, mainly due to the decline in raw milk prices. On the cost side, the company continues to promote quality and efficiency. The sales expense ratio increased by 1.3 pct to 15.27% year-on-year. It is expected that promotion expenses will increase in the face of market competition and the launch of new products, which will lead to an increase in publicity and marketing. Management expenses decreased by 0.24pct to 3.95% year over year. The financial expense ratio decreased by 0.12 pct to 0.89% year on year, mainly due to a decrease in bank loan interest rates. 2024Q3 achieved a net profit margin of 6.36%, an increase of 1.38 pct over the previous year.

Risk warning: Market price war intensifies, food safety issues.