Key points of investment
Incident: The company announced its 2023 mid-year report. 23H1 total revenue/net profit attributed/net profit non-attributable net profit was 141.39/338/317 million yuan, respectively, -1.88%/+20.07%/+31.03% over the same period last year. 23Q2 Total revenue/net attributed/net profit after deducting non-attributable net profit were 70.68/1.51/142 million yuan, respectively, -1.34%/+30.14%/+39.00% over the same period.
Q2 The growth rate of liquid milk improved month-on-month, and the new light fluctuated. By category, 23H1 liquid milk/other dairy products/animal husbandry products had revenue of 80.05/41.89/1,053 billion yuan, accounting for 56.9%/29.8%/7.5%, YoY +3.1%/-5.1%/-27.2%; Q2 liquid milk/other dairy products/animal husbandry products had a revenue of 3,34/20.37/577 billion yuan, +5.4%/-9.8%/-23.5%. Q2 liquid milk accelerated month-on-month and improved. By category, the growth rate of fresh milk is expected to be in double digits in the first half of this year, low-temperature yogurt will achieve positive growth, and the room temperature category will show a downward trend. Among them, white milk has declined less; affected by the decline in feed and raw milk sales, animal husbandry revenue has declined a lot year-on-year.
Gross margin has increased, sales expenses have stabilized, and the quality of domestic operations has improved. 23H1's gross margin was 20.12%, +1.01pct, of which Q2 gross margin was 20.28%, year-on-year +1.86pct. This is mainly due to an easing in the cost of upstream raw milk. The average price of fresh milk in 23Q1/Q2 is 4.04/3.87 yuan/kg, which is -4.61%/-6.90%. The 23H1 sales expense ratio was 12.16%, -0.02 pct year on year, of which the Q2 sales expense rate was 12.55%, +1.51 pct year on year. This is mainly due to the narrowing of cost investment due to the impact of the Q2 epidemic last year, and the overall sales expense ratio is expected to remain stable this year. Combining the above factors, the 23H1 return net interest rate was 2.39%, up 0.44 pct year on year, and the Q2 return net interest rate was 2.13%, up 0.52 pct year on year. In addition, Xinlite's profit for the first half of the year was 85 million yuan, calculated at 39.01% of the company's shareholding, contributing 33 million yuan, and Xinlight's net interest rate was 2.25%, down 1.17 pct from the previous year. Excluding the influence of New Light, the domestic business profit growth rate was 32%, and the net interest rate was 2.94%, an increase of 0.77 pct over the previous year.
Profit forecast and investment suggestions: According to the adjusted profit forecast based on the interim report, the company is expected to achieve revenue of 297.20/331.25/36.631 billion yuan in 2023-2025, an increase of 5.33%/11.46%/10.59%, net profit of 648/7.70/896 million yuan, an increase of 79.79%/18.80%/16.25%, and EPS of 0.47/0.56/0.65 yuan; corresponding to the closing price of August 28, 2023, PE is 22.02/18.54/ 15.95X, maintaining the “increase in holdings” rating.
Risk warning: increased competition in the industry, rising raw material costs, food safety issues.