News Alert: FY23 preliminary results below expectations
- FY23 net profit ranges from RMB160m to RMB200m, down 66% to 72% y-o-y.
- Preliminary results were below expectations given the pressure from lower-than-expected raw milk price.
- Expect margin to recover sequentially with improving average milk yield and easing cost pressure. Our last rating was BUY with TP of HK$0.81.
FY23 preliminary results. FY23 preliminary net profit ranges from RMB160m to RMB200m, contracting by 66% to 72% y-o-y, below market’s and our expectations. In 2H23 alone, net loss could be RMB18m-RMB58m. Gross margin of raw milk business contracted by 3ppts to c.27% in FY23, mainly due to the lingering pressure from raw milk price (industry price down 7.7% y-o-y in 2023), while we expect feed cost to stay flattish for the company in 2023. The fair value losses in dairy cows also increased by 26% to 32% in FY23 (FY22: RMB988m). Meanwhile, revenue from new businesses (including feeds and digital platforms) expanded by 40% y-o-y to RMB3.3bn.
Expect sequential margin improvement. Total herd size reached 450,000 by end of FY23 with average milk yield up c.3.3% to 12.6 tonnes/year. While we expect raw milk price to see a mid-single digit decline in FY24, easing pressure from feed cost and the continuing improvement in milk yield should be able to more than offset the impacts and support sequential margin recovery. Our last rating was BUY with TP of HK$0.81.