Event: Australian excellent released operating results in the first half of 2022, 22H1 achieved operating income of 3.63 billion yuan, year-on-year-15.1% (the company rescheduled 2021 financial data due to the accounting adjustment of customer loyalty program and distributor incentive program); home net profit of 222 million yuan, year-on-year-62.9%, better than the previous performance forecast.
The overall income of Q2 declined, and Hipnokai continued to adjust. The overall infant powder industry is under pressure from a decline in China's birth rate and repeated outbreaks in the first half of the year, with sales falling 4 per cent year-on-year in the first half, according to AC Nielsen. According to the split of the company, 1) in 22H1's own brand formula, the income of milk powder / goat milk powder business was 1.279 million yuan, yoy- 37.6% /-1.5%, of which ① in goat milk powder, China / overseas realized goat milk powder revenue of 1.583 million yuan, yoy-1.5%/-1.0%. The decline in sheep milk powder revenue is mainly due to the company's initiative to inventory in the first half of the year, adjustment of sales staff in some areas, shortage of some products, and so on. The income of ② milk powder business declined a lot, mainly affected by a series of sales strategy adjustments of Hipnokai 1897. 2022H1 milk powder achieved an income of 1.279 billion yuan, yoy-37.6%. By the beginning of July, the inventory level had dropped 1.5-2 months to more than 1 month level, and the terminal sales quality had improved. 2) Private Brand and other / Nutrition Business 22H1 realized revenue of 600x079 million yuan, yoy+30.1%/+15.4%.
The increase in discount affects gross profit, and the increase in fees leads to a greater decline in net profit. 2022H1's gross profit margin / net profit margin 47.1% / 6.1%, year-on-year-3.0/-7.9pcts, the decline in gross profit margin is mainly due to increased market competition, the company increased its own brand formula distributor discount. The administrative expense rate / sales and distribution expense rate of 2022H1 is 30.3% / 10.5% respectively, which is + 4.1pcts/+2.7pcts compared with the same period last year. The increase of administrative expense rate is due to the continuous increase of R & D expenses caused by the company's development of new products, and the increase of professional fees caused by the comprehensive offer and placement of new shares by the group. The increase of sales expense rate is mainly due to the company increasing the proportion of publicity expenses, and in order to cope with the fierce market competition, the company increases the channel promotion expenses.
Competition in the industry is still fierce, and the channel adjustment is gradually coming to an end. The main results are as follows: 1) this year, the infant powder industry is facing the dual effects of repeated domestic epidemics leading to a decline in demand and rising costs caused by conflicts in Europe.
In addition, the company strengthened channel adjustment in response to changes in the industry, resulting in lower revenue growth in the first half of the year than the industry as a whole. 2) looking forward to the whole year, the company continues to maintain the goal of low double-digit growth of goat milk powder revenue for the whole year; as the channel adjustment of Hipnokai 1897 is coming to an end, the company expects the growth rate of milk powder revenue to return to single digits in the second half of the year.
Profit forecast, valuation and rating: considering that the domestic birth rate is still declining and the industry competition intensifies, the company's homing net profit forecast for 2022-2024 is lowered to 7.98 × 103,071 million yuan respectively (compared to the previous value of-33% pesque 30% pesque 29%). The EPS for 2022-2024 is 0.44 × 0.52x0.59 yuan respectively, and the current stock price corresponds to 12x/10x/9x. The trend of domestic substitution of milk powder continues, coupled with the fact that the implementation of the new national standard next year has a better clearing effect on the industry, and the company is the leading enterprise in the sheep milk powder brand, there is still room for growth in the medium and long term, and we maintain the "overweight" rating.
Risk hints: increasing pressure on slowing economic growth, increased competition in the industry, and food safety problems.