Company announcement: Operating revenue of $3,625 million in '23, +15.90% YoY; net profit to mother of RMB 280 million, +31.04% YoY. 23Q4 revenue was 1,647 million yuan, +3.06% YoY; net profit to mother was 277 million yuan, -4.20% YoY. 24Q1 revenue of 725 million yuan, +6.76% year on year; net profit to mother of 0.25 million yuan, +331.26% year on year; deducted non-net profit of 20 million yuan (-07 billion yuan in 23Q1).
Revenue side: The ready-to-drink business is growing rapidly, and brewing is actively removing inventory.
By business, the company's brew/ready-to-drink revenue in '23 was 26.86/901 million yuan, +9.37%/41.16% year-on-year, and ready-to-drink business revenue accounted for +4.5pct to 25.1%. In 23, the ready-to-drink business introduced more than 600 new sales talents and formed an independent ready-to-drink sales team; Lanfangyuan Frozen Lemon Tea has received good feedback in Guangdong, Beijing, and East China since its launch in February 23, and sales revenue before tax has exceeded 200 million in 23 years.
23Q4 brew/ready-to-drink business revenue was -1%/+60% year-on-year, and the brewing business may be affected by the delay of the Spring Festival peak season. 24Q1 brew/ready drink business revenue was 485/234 million yuan, +5.5%/10.1% year over year; 23Q4+24Q1 brewing business revenue remained flat year on year, and ready-to-drink business revenue was +26% year over year. The brewing business actively digests channel inventory after the Spring Festival, and gradually starts sales after 3 months of ready-to-drink.
Looking at the subregions, the revenue of East China, Central China, Southwest China, and Northwest China in '23 was 16.0/5.3/4.6/30 billion yuan respectively, +18%/15%/11%/10% YoY; 24Q1 was +6%/1%/13%/4% YoY, and the core market developed steadily. The net number of the company's dealers increased by 199 to 1,531 in '23, and the ready-to-drink business actively solicited investment.
Profit side: The gross margin improved markedly, and 24Q1 strengthened the cost-efficiency ratio.
Net profit margin for 23 years was +0.9 pct year over year, of which: gross margin +3.7 pct year over year (+4.03/6.73 pct year on year), mainly due to: 1) the average price of brewing business increased by about 1%; 2) raw materials and labor accounted for -2.0/ -1.2pct year on year in operating income, mainly due to a decrease in the prices of skimmed milk powder, vegetable fat powder, cartons, etc.; 3) The manufacturing cost of the ready drink business accounted for 3.7 pct year on year, which is a dilution of the scale effect. The sales rate in '23 was +5.8pct year on year. Among them, employee salary/marketing fees/advertising expenses accounted for +0.5/2.6/2.3 pct of revenue year over year, which is an increase in ready-to-drink investment; the management rate was -1.1 pct year over year. 23Q4 net margin was -1.3 pct year over year, gross margin was +3.2 pct year over year, sales rate was +6.8 pct, and management rate was basically flat.
24Q1 net margin +2.63 pct year on year, with 24Q1 gross margin +2.6 pct year on year and sales/management rate -2.8/-0.3 pct year on year. Cost efficiency is expected to improve.
Looking ahead to 24, the Q1 brewing business will continue to sink; the ready-to-drink business only initially formed a team at the end of April '23, and this year it will accelerate the freezing of outlets and boost sales. The new president, Mr. Yang Dongyun, has extensive experience in the consumer goods industry. In the future, he will further improve the long-term incentive mechanism and look forward to an increase in team enthusiasm.
Profit forecast: Combined with the annual report and considering the overall consumption environment, we lowered the 24-25 revenue & profit forecast values. We expect the company's revenue growth rates to be 16%/13%/11% for 24-26 (amount of 42/48/5.3 billion yuan, 24-25 years ago value was 43.7/4.95 billion yuan), and the net profit growth rate to mother will be 24%/24%/24% (amount of 3.5/43/54 billion yuan, 24-45 million yuan, 24-25 years ago). The corresponding PE is 23X/18X/15X, respectively. Maintain a “buy” rating.
Risk warning: New product cultivation falls short of expectations, regional market competition intensifies, raw materials rise too fast