Summary of the report
Australian excellent's first-half revenue was 3.63 billion, down 15% from the same period last year, and its net profit was 210 million, down 63% from the same period last year. The gross profit margin in the first half of the year was 47.1%, a decrease of 3pct compared with the same period last year, and a net profit margin of 5.7%, a decrease of 7.7pct over the same period last year. The channel adjustment measures for milk powder are a drag on performance.
Goat milk powder dropped slightly. The revenue of sheep milk powder in the first half of the year was 1.67 billion, down 1.5% from the same period last year, mainly due to insufficient supply of baby powder and mother powder, resulting in sales falling short of expectations. Sheep milk powder after the fleeing incident last year, through active channels of rectification, has been significantly improved, basically returned to the level before fleeing goods. Aoyou's layout in the upstream Goat Granny Source has established its competitive advantage in goat milk powder. Jiabeit has mastered the world's major supply of sheep whey protein and is currently promoting a new infant powder production facility in the Netherlands (with a production capacity of 35000 tons). Will further enhance its advantage on the supply side.
The channels of milk powder have been rectified and growth is expected to resume in the second half of the year. The revenue of milk powder in the first half of the year was 1.28 billion, down 37.6% from the same period last year.
Affected by the intensification of competition in the industry, terminal sales are under pressure, so the company takes measures to actively adjust the channel of Hipnokai 1897, reduce channel inventory, ensure product freshness, and monitor the inventory level more strictly. The company expects milk powder business to resume growth in the second half of the year.
Nutrition and private brand business continued to grow. Nutrition income in the first half of the year was 79 million, an increase of 15% over the same period last year. Mainly due to the sales contribution of a series of probiotic nutrition products newly launched by the group last year. Revenue from private brands and other businesses reached 600 million, up 30% from the same period last year. The growth of private brands was mainly due to the increase in orders in the Middle East and Asia, as well as the gradual easing of the epidemic in overseas regions, which led to a rebound in dairy commodity prices and demand.
The increase in discounts reduced the gross profit margin. The annual gross profit margin in the first half of the year was 47.1%, a decrease in 3pct compared with the same period last year, mainly due to fierce competition in the industry and an increase in discounts given to distributors. The gross profit rate of goat milk powder is 57.4%, which is lower than that of the same period last year. In addition to the discount factor, the rapid rise in the price of raw materials such as goat whey is also an important reason. The gross profit margin of milk powder is 57%, a decrease of 2.5pct compared with the same period last year.
Inventory provision of 53 million, down 70% from 180 million in the same period last year, mainly because the company has stricter management of the freshness of products, so that the provision is reduced accordingly.
Yili becomes the controlling shareholder, and the synergy effect can be expected. 600887.SH acquired a 59 per cent stake in ao you in the first half of the year, becoming its controlling shareholder. Yili has a wide distribution of dairy products and a huge sales network in China. This acquisition, the two sides can be in the product mix, milk supply, sales network and other aspects of cooperation, Australia excellent is expected to benefit.
On the whole, we believe that despite the intensified competition in the industry and the relatively stronger competitive advantage of the leading enterprises, the market concentration will increase in the future, and we are optimistic about the future performance of Australia excellent hand in hand with Yili. In the light of the changes in the current market environment, we have lowered our profit forecast. The annual net profit in 22-23-24 is RMB 79.00 million and HK $0.51 million respectively, corresponding to EPS.
Taking into account the decline in birth population and the depressed sentiment in the consumer sector, we lowered our target price and maintained our "buy" rating, with a target price of HK $6.96, up 19% from the current share price.
Risk tips: the number of births has declined more than expected; competition in the industry has intensified; and serious safety accidents have occurred in the industry or companies.