Incidents:
The company released the 2023 interim performance report: In the first half of 2023, the company achieved operating income of 1,133 million yuan, an increase of 10.71% over the previous year; the corresponding net profit was 136 million yuan, an increase of 51.74% over the previous year. As of June 30, 2023, the company's cash on hand and equivalent goods was $2,466 billion; during the same period, the company's payout ratio increased to 40% (22H1 was 25%).
The performance of pets and pet products continued to rise, and the share of online channels continued to rise. Looking at business segments, the company's home care/personal care/pet and pet products business had revenue of 1,044/0.43 billion yuan in the first half of 2023, with a year-on-year increase and decrease of 10.81%/-3.94%/41.10%, respectively. Among them, pet products continued to expand the market and continued to achieve high performance growth. By channel, the company's online channels (online self-operated stores, online distributors, community e-commerce platforms) /offline channels (offline distributors, enterprise and group customers, overseas distributors, Libai channel, and foundry business) 23H1 had revenue of 341/791 billion yuan, up 25.01%/5.50%, respectively. Among them, the share of online channel revenue increased by +3.45pct to 30.1% year-on-year.
Profitability improved year over year and rate control was stable
The gross margine/net margin of 2023H1 was 41.30%/12.0% respectively, with year-on-year changes of +2.15/+3.24pct. Among them, the gross margin of home care/personal care/pets and pet products was 41.2%/42.6% /45, respectively.
4%, year-on-year changes of +2.35/+3.30/-4.70 pct, respectively. In terms of expenses during the period, 23H1's sales and distribution expenses/administrative expenses accounted for 23.38%/7.47% of revenue, respectively, with year-on-year changes of 0.06/0.37 pct compared to 22H1; financial costs accounted for 0.04% during the same period, which remained stable year on year.
The basic home care market position has not changed, and the pet sector has actively laid out and built the moat home care business segment. While maintaining the leading brand strength of insecticide, mosquito repellent, and household cleaning products (the company's insecticidal and mosquito repellent products have occupied the first place in the domestic market for 8 consecutive years), it has launched differentiated products and created a variety of high-margin products. In terms of the pet business, since entering the pet sector, the company has continuously strengthened the upstream supply chain and downstream channel distribution capabilities of pet products, food, and health products. It has successively laid out cat litter factories, Shandong Shuaike, Zhongbo Luya, etc. through strategic cooperation and equity investment, and has gradually developed from online channels to pet omni-channel collaborative development, investing in claw technology, and developing plans for a thousand offline stores. In the future, it will continue to expand the pet business map and drive the company's performance growth with the pet racetrack.
Investment advice and profit forecasting
On the product side, we are optimistic about the vast growth space brought about by the company entering the pet industry; on the channel side, we believe that the company's omni-channel coverage strategy that goes hand in hand with online and offline is expected to achieve multi-dimensional growth. It is estimated that the company's operating income for 2023-2025 will be 1,578/17.64/1,933 million yuan, net profit to parent will be 1.11/147/174 million yuan, corresponding EPS will be 0.08/0.11/0.13 yuan/share, respectively, and the current stock price corresponding to PE is 17.79/13.43/11.31, respectively. Give it a “buy” rating.
Risk warning
Risk of increased competition in the industry, risk of rising raw material prices, risk of inventory backlog for sales and distributors