On October 25, 2024, Yangyuan Drinks released its 2024 three-quarter report.
Key investment points
Investment income had a big impact, and profits fell short of expectations
Overall consumer demand is weak, and revenue growth is in line with expectations. 2024Q1-3's total revenue was 4.229 billion yuan (same decrease of 7.81%), net profit due to mother was 1.229 billion yuan (same decrease of 4.69%), after deducting non-net profit of 0.967 billion yuan (same decrease of 9.32%). Total revenue for 2024Q3 was 1.287 billion yuan (same decrease of 18.79%), net profit due to mother was 0.199 billion yuan (same decrease of 47.26%), after deducting non-net profit of 0.192 billion yuan (same decrease of 45.17%).
Sales expenses fluctuate from quarter to quarter, and the overall cost of expenses did not change much. 2024Q1-3 sales/management expenses were 12.48%/1.75%, respectively, +1.04/+0.21pcts; 2024Q3 was 16.29%/2.00%, respectively, +3.26/+0.65pcts, respectively. Profits were affected by fluctuations in investment income, and performance fell short of expectations. 2024Q1-3 gross margin/net margin was 46.53%/29.06%, respectively, +1.22/+0.95pcts year on year; 2024Q3 gross margin/ net margin was 45.49%/15.49%, respectively, -0.15/ -8.36pcts year over year, respectively. The 2024Q3 investment income was -0.087 billion yuan (-0.032 billion yuan in the same period last year), of which investment income for joint ventures and joint ventures was -0.099 billion yuan (-0.036 billion yuan in the same period last year).
The sales payback performance was good, and the net cash flow improved significantly compared to last year. Net cash flows from operating activities for 2024Q1-3/2024Q3 were -0.119/-0.145 billion yuan, respectively, compared to -0.152/-1.018 billion yuan for the same period last year; 2024Q1-3/2024Q3 sales repayments were 3.549/0.691 billion yuan, respectively, -8.47%/+112.15%, respectively).
Direct sales performance remained steady, and the East China market performed relatively well
By region, the revenue of 2024Q3 in East China/ Central China/ North China/ Southwest China was 5.09/0.298/0.259/0.114 billion yuan, respectively, or -15.01%/-20.69%/-29.67%/-6.52%, respectively. East China, Central China, and North China are still the company's basic market. Among them, the Hebei base operations are steady, and sales around Hebei have been damaged. By channel, the revenue of 2024Q3 distribution/direct sales channels was 12.32/0.046 billion yuan respectively, or -19.93%/+1.80%, respectively. Direct sales channels remained stable, and distribution channels were greatly affected. By the end of 2024Q3, the total number of dealers was 2,512, an increase of 275 over the beginning of 2024.
Profit forecasting
We are optimistic that the company's walnut dairy products will continue to develop channels and seek growth. The short-term performance is affected by weak overall consumption and year-on-year increase in investment income losses. According to the three-quarter report, we adjusted the company's 2024-2026 EPS to 1.00/1.19/1.37 (previous value was 1.25/1.37/1.52) yuan. The current stock price corresponds to PE 21/18/15 times, respectively, maintaining a “buy” investment rating.
Risk warning
There are downside macroeconomic risks, walnut nectar growth falling short of expectations, risk of rising costs, etc., and the risk that Red Bull's growth falls short of expectations.