Description of the event

New Dairy released its 2024 three-quarter report. The company's 2024Q1-3 gross revenue was 8.15 billion yuan (-0.54% YoY); net profit to mother was 0.474 billion yuan (+24.37% YoY), after deducting non-net profit of 0.507 billion yuan (+29.5% YoY). The company's total revenue for 2024Q3 was 2.785 billion yuan (-3.82% YoY); net profit to mother was 0.177 billion yuan (+22.92% YoY), after deducting non-net profit of 0.193 billion yuan (+19.73% YoY).

Incident comments

The main business is growing steadily, and the trend of improving profits has not changed. The company's 2024Q1-3 gross revenue was 8.15 billion yuan (-0.54% YoY); net profit to mother was 0.474 billion yuan (+24.37% YoY), after deducting non-net profit of 0.507 billion yuan (+29.5% YoY). The company's total revenue for 2024Q3 was 2.785 billion yuan (-3.82% YoY); net profit to mother was 0.177 billion yuan (+22.92% YoY), after deducting non-net profit of 0.193 billion yuan (+19.73% YoY). The decline in 2024Q3 revenue was mainly due to the impact of the trade business being dragged down and the output of a yogurt cow. Against the backdrop of demand pressure, the company's product structure continued to be optimized.

Structural optimization was compounded by declining costs, and the increase in net interest rate increased sequentially. The company's 2024Q1-3 net profit margin increased 1.16 pct to 5.81% year on year, gross margin +1.67 pct year on year, and the period expense ratio was +0.38 pct year on year to 21.49% year on year, with detailed changes: sales expenses ratio (+0.77pct year over year), management expenses rate (+0.01pct year over year), R&D expense ratio (-0.02pct year over year), financial expense ratio (-0.37 pct year over year), operating tax and surcharges (+0.03 pct year over year). The company's 2024Q3 net income margin increased 1.38 pct to 6.36%, gross margin +2.4 pct to 28.83% year on year, and the period expense ratio was +1.01 pct to 20.58% year on year. Details were changed: sales expense ratio (+1.3 pct year over year), management expense ratio (-0.24 pct year over year), R&D expenses rate (+0.07 pct year over year), financial expenses ratio (-0.12 pct year over year), sales tax and surcharges (+0.07 pct year over year). In the context of declining costs, the company's product structure remained optimized (low temperature fresh acid led growth). Along with the increase in direct sales models, marketing and other expenses improved in quality and efficiency, driving the profit improvement in 2024Q3 to expand sequentially.

The company continues to focus on the “Fresh Cube” strategy, and shareholder returns have increased. At the annual level, the company's revenue side is still expected to achieve positive growth, while the increase in profitability is accelerating compared to the same period. At the same time, the company paid an interim dividend for the first time, amounting to 30.1235 million yuan, demonstrating the company's confidence in future profit growth and enhancing shareholder returns in a timely manner. The estimated net profit for 2024/2025 is 0.551/0.685 billion yuan, corresponding to EPS of 0.64/0.80 yuan, corresponding to PE valuation 21/17 times, maintaining a “buy” rating.

Risk warning

1. The risk of slow recovery in demand;

2. Industry competition further exacerbates risks;

3. Risk of changes in consumer consumption habits, etc.