Investment Rating - The report maintains a "Buy" rating for the company [7] Core Views - The implementation of fertility stimulus policies is expected to enhance the birth rate and benefit the leading infant formula company [1][2] - The company is positioned to benefit from industry demand recovery and increased market concentration, with anticipated revenue growth in 2024 [3] - The company has adjusted its profit forecasts upward, expecting EPS of 0.42, 0.46, and 0.50 RMB for 2024-2026, respectively [4] Summary by Sections Investment Rating - The target price is set at 7.40 HKD, with the current closing price at 5.93 HKD, indicating significant upside potential [8][7] Industry Outlook - The number of newborns in China is projected to increase by 52,000 (+5.8%) in 2024, reaching 9.54 million [2] - Local governments are rolling out child-rearing subsidies, which may be replicated in other provinces, positively impacting birth rates and infant formula consumption [2] Company Performance - The company is expected to achieve positive revenue growth in 2024, driven by improved inventory management and stable pricing of core products [3] - The gross margin is projected to improve due to declining raw material costs and effective cost control measures [3] - The company plans to distribute a mid-term dividend of 1.35 billion RMB in 2024, reflecting a high dividend payout ratio of 72% [3] Financial Projections - Revenue is forecasted to grow from 20,838 million RMB in 2024 to 22,775 million RMB in 2026, with a CAGR of approximately 4.10% [6] - Net profit is expected to increase from 3,832 million RMB in 2024 to 4,493 million RMB in 2026, with a CAGR of approximately 8.13% [6] - The company’s EPS is projected to rise from 0.42 RMB in 2024 to 0.50 RMB in 2026 [6]

Investment Rating - The report maintains an "Outperform" rating for the company, indicating a positive outlook compared to the market [2]. Core Insights - The company reported a 3.7% year-on-year increase in revenue for H1 2024, reaching 10.095 billion, and a 10.5% increase in net profit, amounting to 1.875 billion [2]. - A mid-term dividend of 0.16 HKD per share was announced, with a payout ratio of 72% [2]. - The company has adjusted its profit forecasts for 2024 downwards due to declining birth rates and intense industry competition, projecting net profits of 3.69 billion, 3.86 billion, and 4.02 billion for 2024, 2025, and 2026 respectively [2][4]. - The company maintains a leading market share in the infant formula sector, with a total market share of 19.2% and offline market share of 22.7% [3]. Summary by Sections Financial Performance - For H1 2024, the company achieved a gross margin of 67.9%, up 2.56 percentage points year-on-year, contributing to a net profit margin of 18.6%, an increase of 1.15 percentage points [3]. - The revenue for 2024 is projected to be 20.476 billion, with a year-on-year growth rate of 5% [4]. - The net profit for 2024 is expected to be 3.691 billion, reflecting a 9% increase compared to the previous year [4]. Market Position - The ultra-premium infant formula segment saw a revenue increase of 19.6% to 7.14 billion, driven by the growth of the Star Flying series [3]. - The company has effectively managed its channel inventory, positioning itself to capture market share as smaller brands exit the market [3]. Profitability Metrics - The report indicates a decrease in sales expense ratio to 35%, down 0.52 percentage points, due to optimized marketing strategies [3]. - The projected price-to-earnings (PE) ratios for 2024, 2025, and 2026 are 10x, 10x, and 9x respectively, compared to an average PE of 12x for comparable companies [2][4].

Financial Performance - Revenue for the six months ended June 30, 2024, reached RMB 10,094.9 million, a 3.7% increase compared to the same period in 2023[4] - Gross profit increased by 7.8% to RMB 6,852.5 million in the first half of 2024, up from RMB 6,359.3 million in 2023[4] - Net profit attributable to shareholders rose by 18.1% to RMB 1,911.5 million in the first half of 2024, compared to RMB 1,618.7 million in the same period last year[4] - Basic and diluted earnings per share increased by 10.5% to RMB 0.21 in the first half of 2024, up from RMB 0.19 in 2023[4] - Revenue increased by 3.7% to RMB 10,094.9 million in the first half of 2024 compared to RMB 9,735.2 million in the same period of 2023[14] - Gross profit rose by 7.8% to RMB 6,852.5 million, with gross margin improving from 65.3% to 67.9% due to growth in the Starry Flight product series[16] - Net profit attributable to shareholders increased by 18.1% to RMB 1,911.5 million, with a profit margin of 18.9%[13] - Pre-tax profit increased by 24.4% from RMB 2,435.0 million in the first half of 2023 to RMB 3,029.4 million in the first half of 2024[22] - Net profit for the period grew by 18.1% from RMB 1,618.7 million in the first half of 2023 to RMB 1,911.5 million in the first half of 2024[24] - Revenue for the six months ended June 30, 2024, increased to RMB 10,094,947 thousand, up 3.7% from RMB 9,735,225 thousand in the same period last year[88] - Gross profit rose to RMB 6,852,455 thousand, a 7.8% increase compared to RMB 6,359,266 thousand in 2023[88] - Net profit attributable to owners of the parent company reached RMB 1,875,011 thousand, up 10.6% from RMB 1,695,913 thousand in the previous year[88] - Total comprehensive income for the period was RMB 1,886,699 thousand, compared to RMB 1,747,812 thousand in 2023[89] - Earnings per share (basic and diluted) for the period were RMB 0.21, compared to RMB 0.19 in the same period last year[88] - The company's profit before tax for the six months ended June 30, 2024, was RMB 3,029,435,000, an increase from RMB 2,435,048,000 in the same period in 2023[93] - Net cash generated from operating activities for the six months ended June 30, 2024, was RMB 1,567,971,000, up from RMB 1,136,562,000 in the same period in 2023[93] - The company's pre-tax profit for the six months ended June 30, 2024, was RMB 3,242,492 thousand, compared to RMB 3,375,959 thousand in the same period in 2023, reflecting a decrease of 3.9%[108] - The company's profit attributable to ordinary equity holders for the six months ended June 30, 2024, was RMB 1,875,011 thousand, compared to RMB 1,695,913 thousand in the same period in 2023[115] Market and Industry Trends - The number of newborns in China decreased to approximately 9.0 million in 2023, down from 10.94‰ in 2018, with the number of children aged 0-3 dropping to 28.5 million[5] - China's per capita disposable income reached RMB 39,218 in 2023, with a compound annual growth rate of 6.8% from 2018 to 2023, driving demand for premium infant formula products[5] - The Chinese government's supportive policies, such as the "Three-Child Policy" and stricter national safety standards for infant formula, are expected to stabilize the market[6][7] - The premium infant formula segment is expected to grow due to urbanization, rising disposable income, and increased health awareness[5] Operational Highlights - The company's offline sales network generated 76.8% of total dairy product revenue, with over 2,800 distributors covering more than 80,000 retail outlets[9] - The company's production capacity reached over 363,000 tons annually, supported by 11 production facilities, including a newly licensed infant formula facility in Canada[10] - The company acquired over 1,430,000 new customers through approximately 460,000 face-to-face seminars held in the first half of 2024[11] - Nutritional supplement revenue from Vitamin World USA contributed RMB 81.3 million, accounting for 0.8% of total revenue[12] - Sales cost decreased by 4.0% to RMB 3,242.5 million, mainly due to lower raw material prices[15] - Sales and distribution expenses increased by 2.2% to RMB 3,535.4 million, driven by higher online and promotional activity costs[18] - Administrative expenses decreased by 2.5% to RMB 738.7 million, primarily due to reduced R&D costs[19] - The company's inventory decreased by RMB 102,725,000 in the six months ended June 30, 2024, compared to a decrease of RMB 14,134,000 in the same period in 2023[93] - Trade receivables and bills receivable decreased by RMB 123,240,000 in the six months ended June 30, 2024, compared to an increase of RMB 88,937,000 in the same period in 2023[93] - The company's depreciation of property, plant, and equipment increased to RMB 298,677,000 in the six months ended June 30, 2024, from RMB 259,403,000 in the same period in 2023[93] - The company's interest income increased to RMB 180,525,000 in the six months ended June 30, 2024, from RMB 151,047,000 in the same period in 2023[93] - The company's income tax paid increased to RMB 1,555,491,000 in the six months ended June 30, 2024, from RMB 1,317,360,000 in the same period in 2023[93] - Investment activities resulted in a net cash outflow of RMB 363.866 million in the first half of 2024, compared to a net cash inflow of RMB 2.311 billion in the same period of 2023[94] - The company purchased structural deposits worth RMB 4.645 billion in the first half of 2024, a significant increase from RMB 2.42 billion in the same period of 2023[94] - Redemption of structural deposits generated RMB 4.05 billion in cash inflow in the first half of 2024, down from RMB 5.263 billion in the same period of 2023[94] - The company's cash and cash equivalents decreased by RMB 203.744 million in the first half of 2024, compared to an increase of RMB 2.014 billion in the same period of 2023[94] - The company's cash and cash equivalents balance stood at RMB 7.21 billion as of June 30, 2024, down from RMB 7.581 billion as of June 30, 2023[94] - The company operates in two reportable segments: raw milk production and sales, and dairy products and nutritional supplements production and sales[98] - Total revenue for the six months ended June 30, 2024, reached RMB 10,094,947 thousand, compared to RMB 9,735,225 thousand in the same period in 2023, representing a 3.7% increase[99][104] - Revenue from external customers in Mainland China increased to RMB 9,987,364 thousand in 2024 from RMB 9,629,346 thousand in 2023, a 3.7% growth[102][105] - Revenue from the United States decreased to RMB 81,305 thousand in 2024 from RMB 105,879 thousand in 2023, a 23.2% decline[102][105] - Revenue from Canada was RMB 26,278 thousand in 2024, compared to no revenue reported in 2023[102][105] - Segment profit for the dairy products and nutritional supplements segment increased to RMB 2,894,421 thousand in 2024 from RMB 2,561,633 thousand in 2023, a 13% growth[99][101] - Total assets as of June 30, 2024, were RMB 35,609,185 thousand, slightly lower than RMB 36,194,678 thousand as of December 31, 2023[99][101] - Total liabilities as of June 30, 2024, decreased to RMB 8,565,478 thousand from RMB 9,860,332 thousand as of December 31, 2023, a 13.1% reduction[99][101] - Bank interest income increased to RMB 138,364 thousand in 2024 from RMB 112,069 thousand in 2023, a 23.5% increase[99][106] - Government grants related to income decreased to RMB 401,255 thousand in 2024 from RMB 517,622 thousand in 2023, a 22.5% decline[106] - The company recognized an impairment loss of RMB 85,925 thousand on property, plant, and equipment, and right-of-use assets due to losses incurred by a subsidiary[109] - Financial costs for the six months ended June 30, 2024, amounted to RMB 26,236 thousand, a slight decrease from RMB 27,347 thousand in the same period in 2023[110] - The company's tax expense for the six months ended June 30, 2024, was RMB 1,117,984 thousand, up from RMB 816,366 thousand in the same period in 2023[112] - The company acquired property, plant, and equipment worth RMB 332,733 thousand during the six months ended June 30, 2024, slightly lower than RMB 342,296 thousand in the same period in 2023[117] - The total number of dairy cows owned by the company as of June 30, 2024, was 109,696, an increase from 102,497 as of December 31, 2023[119] - The total value of dairy cows as of June 30, 2024, was RMB 2,304,520 thousand, compared to RMB 2,235,220 thousand as of December 31, 2023, showing an increase of RMB 69,300 thousand[123][124] - The value of lactating cows increased to RMB 1,230,810 thousand as of June 30, 2024, from RMB 969,000 thousand as of December 31, 2023, reflecting a growth of RMB 261,810 thousand[124] - The total inventory as of June 30, 2024, was RMB 2,139,247 thousand, a decrease from RMB 2,258,059 thousand as of December 31, 2023, primarily due to a reduction in feed and raw materials[128] - Trade receivables and bills receivable decreased to RMB 308,472 thousand as of June 30, 2024, from RMB 431,184 thousand as of December 31, 2023, indicating improved collection efficiency[129] - The fair value of biological assets classified as Level 3 was RMB 2,304,520 thousand as of June 30, 2024, compared to RMB 2,252,706 thousand as of December 31, 2023[127] - The company no longer held any dairy goats as of June 30, 2024, following the sale of a subsidiary, compared to a total of 4,752 dairy goats as of December 31, 2023[121][122] - The value of work-in-progress inventory increased significantly to RMB 1,054,892 thousand as of June 30, 2024, from RMB 676,838 thousand as of December 31, 2023, reflecting higher production activity[128] - The fair value change minus sales costs resulted in a loss of RMB 331,732 thousand for dairy cows in the first half of 2024, compared to a loss of RMB 731,461 thousand in the same period of 2023[124] - The company's trade receivables aged over three months decreased to RMB 33,058 thousand as of June 30, 2024, from RMB 25,766 thousand as of December 31, 2023, indicating better credit management[130] - Biological assets worth RMB 389,207 thousand were pledged for interest-bearing bank loans as of June 30, 2024, slightly down from RMB 391,283 thousand as of December 31, 2023[127] - Trade payables and bills payable decreased to RMB 1,642,060 thousand as of June 30, 2024, from RMB 1,838,223 thousand as of December 31, 2023[131] - Within trade payables and bills payable, 91.7% (RMB 1,505,086 thousand) were due within three months as of June 30, 2024[132] - Deferred revenue increased to RMB 672,501 thousand as of June 30, 2024, from RMB 632,893 thousand as of December 31, 2023[133] - Contract liabilities decreased to RMB 422,006 thousand as of June 30, 2024, from RMB 683,327 thousand as of December 31, 2023[133] - Capital commitments for construction and purchase of property, plant, and equipment increased to RMB 460,158 thousand as of June 30, 2024, from RMB 294,011 thousand as of December 31, 2023[136] - Sales of raw milk to companies controlled by the controlling shareholder increased to RMB 7,607 thousand in the first half of 2024, compared to RMB 3,183 thousand in the same period of 2023[137] - The total remuneration of key management personnel was RMB 21,913 thousand in the first half of 2024, slightly down from RMB 22,048 thousand in the same period of 2023[139] - Structured deposits increased to RMB 9,405,533 thousand as of June 30, 2024, from RMB 8,670,910 thousand as of December 31, 2023[140] - Interest-bearing bank and other borrowings decreased to RMB 1,267,805 thousand as of June 30, 2024, from RMB 1,377,750 thousand as of December 31, 2023[140] - The fair value of financial assets measured at fair value through other comprehensive income was RMB 1,800 thousand as of June 30, 2024, unchanged from December 31, 2023[143] - The fair value of structured deposits increased to RMB 9,405,533 thousand as of June 30, 2024, up from RMB 8,670,910 thousand as of December 31, 2023[143] - The fair value of interest-bearing bank and other borrowings decreased to RMB 1,260,282 thousand as of June 30, 2024, down from RMB 1,377,054 thousand as of December 31, 2023[145] - A 20% increase or decrease in the price-to-book ratio of comparable companies would result in a corresponding increase or decrease of approximately RMB 360,000 in the fair value of financial assets measured at fair value through other comprehensive income[144] Shareholder and Equity Information - Cold Youbin holds 587,516,458 shares, representing 6.48% of the company's total issued shares, through his controlled company Dasheng Limited[36][37] - Cold Youbin is deemed to have an interest in 3,889,911,881 shares held by Garland Glory Limited through the Cold Family Trust, representing 42.90% of the company's total issued shares[36][37] - Liu Hua holds 345,681,920 shares, representing 3.81% of the company's total issued shares, through the Liu Hua Family Trust[36][37] - Cai Fangliang holds 101,647,734 shares, representing 1.12% of the company's total issued shares, through his controlled company Adroit Shipping Limited[36][37] - Tu Fang'er holds 23,717,804 shares, representing 0.26% of the company's total issued shares, through the J.T. Living Trust[36][38] - Harneys Trustees Limited holds 4,461,740,357 shares, representing 49.21% of the company's total issued shares, as the trustee of the Cold Family Trust and Liu Hua Family Trust[41] - LYB International Holding Limited holds 3,889,911,881 shares, representing 42.90% of the company's total issued shares, through Garland Glory Holdings Limited[41] - Liu Shenghui holds 813,663,014 shares, representing 8.97% of the company's total issued shares, through controlled companies and as the founder of a discretionary trust[41] - Dasheng Limited holds 587,516,458 shares, representing 6.48% of the company's total issued shares, as the beneficial owner[41] - Harneys Trustees Limited holds interests in a total of 4,461,740,357 shares, including 3,889,911,881 shares held by the Leng Family Trust, 345,681,920 shares held by the Liu Hua Family Trust, and 226,146,556 shares held by the Liu Family Trust[42] - The company declared an interim dividend of HKD 0.1632 per share, totaling approximately HKD 1,479,775,478, to be paid by September 30, 2024[48] - The company maintains a dividend policy of distributing no less than 30% of the annual net profit to shareholders, subject to future investment plans[49] - The maximum number of shares that can be issued under the Pre-IPO Share Option Plan is 190,190,704 shares, representing approximately 2.10% of the company's total issued shares as of the date of this interim report

浦银国际研究 浦银国际 公司研究 中国飞鹤 （6186.HK） 公司研究 | 消费行业 中国飞鹤（6186.HK）：产品结构高端化 趋势 2H24 有望持续，重申加大派息力度 尽管行业竞争环境依然不容乐观，但经过两年的渠道改革，飞鹤基本 面已大幅改善：渠道库存回到健康水平，终端价盘大幅回升，超高端 新品卓睿销量涨势喜人，整体品牌力与市场份额稳步提升，毛利率同 比大幅扩张。我们预测公司基本面同比改善的趋势将在 2H24 持续。 结合公司依然较低的估值水平以及管理层承诺持续加大的派息力度， 我们认为飞鹤当前股价依然有较高的性价比和吸引力。上调 2024-2026 盈利预测，上调目标价至 5.21 港元，维持"买入"评级。 收入增速好于行业，管理层对 2H24 预期乐观：飞鹤 1H24 的婴配粉 收入同比增长 5%（线下 3%，线下 9%），一定程度上归功于公司加大 了渠道补货力度。管理层表示 1H24 飞鹤终端销售同比小幅正增长（线 下小幅下跌，线上大幅增长），依然好于行业整体表现。我们预计公 司当前渠道库存为一个半月（相较年初半个月），依然处于较为健康 的水平。管理层预计 2H24 收入将加速增长，2024 全 ...

Investment Rating - The investment rating for the company is Neutral [3][8]. Core Views - The company's high-end product series has driven profit margin improvements, but future profit growth may be limited [2][3]. - In the first half of 2024, the company achieved a revenue of 10.09 billion RMB, a year-on-year increase of 3.7%, while the infant formula milk powder industry experienced a double-digit decline [2][3]. - The gross margin increased by 2.6 percentage points to 67.9%, and operating profit reached 3.06 billion RMB, with an operating profit margin up nearly 5 percentage points to 30.3% [2][3]. - Net profit returned to growth in the first half of 2024, increasing by 18.1% year-on-year to 1.91 billion RMB, corresponding to a net profit margin of 18.9% [2][3]. - The company plans to distribute an interim dividend of 0.1632 HKD per share, a year-on-year increase of 21%, with a payout ratio of 72% [2][3]. Summary by Sections Revenue and Profitability - The company has been restructuring its product line by removing low-end products and focusing on high-end and ultra-high-end series, which has led to a significant increase in gross margin [2][3]. - Future growth drivers include increasing consumer confidence in domestic infant formula quality, the impact of new national standards raising industry entry barriers, and growth in the high-end market segment [2][3]. Pricing Strategy - The company has been consistently raising product prices, with a price increase of approximately 40 RMB per can for its high-end series [2][3]. - Current pricing for high-end products is already at a high level, which may limit future price increases [2][3]. Target Price Adjustment - The target price has been adjusted to 4.00 HKD based on a 7.7 times 2025 price-to-earnings ratio, reflecting a conservative outlook due to ongoing industry pressures and limited profit growth potential [2][3].

Investment Rating - The investment rating for the company is Neutral [3][7]. Core Insights - The company's high-end product series has driven profit margin improvements, but future profit growth may be limited. The company reported a revenue of 10.09 billion RMB in the first half of 2024, a year-on-year increase of 3.7%, while the infant formula industry experienced a double-digit decline. Gross margin improved by 2.6 percentage points to 67.9% due to product structure optimization and the continued growth of high-end series [1][2]. - The company plans to distribute an interim dividend of 0.1632 HKD per share, a year-on-year increase of 21%, with a payout ratio of 72% [1]. Summary by Sections Financial Performance - In the first half of 2024, the company achieved a net profit of 1.91 billion RMB, a year-on-year increase of 18.1%, corresponding to a net profit margin of 18.9%. Operating profit was 3.06 billion RMB, with an operating profit margin of 30.3%, up nearly 5 percentage points year-on-year [1][2]. - Revenue projections for the upcoming years are as follows: 20.8 billion RMB for 2024E, 22.2 billion RMB for 2025E, and 23.3 billion RMB for 2026E, with expected growth rates of 6.5%, 6.5%, and 5.0% respectively [3][8]. Market Dynamics - The growth drivers for the company include increasing consumer confidence in domestic infant formula quality, the release of new national standards raising industry entry barriers, and the growth of the high-end market segment [2]. - The company has been removing low-end product lines and focusing on high-end and ultra-high-end series, which has contributed to the significant increase in gross margin [2]. Valuation - The target price has been adjusted to 4.00 HKD, based on a price-to-earnings ratio of 7.7 times the 2025 earnings, reflecting a conservative outlook due to ongoing industry pressures and limited profit growth potential [2].

Investment Rating - The report maintains a "Buy" rating for China Feihe (6186.HK) with a target price of HKD 4.9, indicating a potential upside of 17% from the current price of HKD 4.19 [4][12]. Core Insights - China Feihe's revenue for the first half of 2024 reached HKD 10.09 billion, a year-on-year increase of 3.7%, while net profit grew by 18% to HKD 1.91 billion. The company is expected to benefit from a potential recovery in birth rates in 2024, signaling the end of the industry's worst period [1][2]. - The company continues to focus on high-end product offerings, with ultra-high-end product revenue increasing by 19% to HKD 7.14 billion, and the introduction of new premium products [1][2]. - The company has a strong cash position with net cash of HKD 20 billion, allowing for continued shareholder returns, with a projected dividend growth rate of at least 10% [2][12]. Financial Performance - The gross margin for the first half of 2024 was 67.9%, an increase of 2.6 percentage points year-on-year, driven by a higher proportion of ultra-high-end products and reduced promotional efforts [1][2]. - The net profit margin improved to 18.9%, up 3.3 percentage points year-on-year, reflecting effective cost management and increased profitability [1][2]. - The company reported a dividend per share of HKD 0.1632 for the first half of 2024, a 21% increase from the previous year, with a payout ratio of 70% [2][12]. Product Strategy - China Feihe is committed to upgrading its product structure towards high-end offerings, launching new products such as preterm infant formula and organic milk powder [1][2]. - The company plans to expand its functional nutrition segment with new adult nutrition milk powder and cheese products in the second half of 2024 [1][2]. Market Outlook - The report anticipates a recovery in birth rates in 2024, which could positively impact the infant formula market, although the industry faces challenges from declining birth rates and intense competition [1][2]. - The company is strategically managing channel inventory to stabilize end prices amid a competitive landscape [1][2].

Investment Rating - The investment rating for the company is "Buy" (maintained) [2] Core Views - The company reported a revenue of 10.095 billion yuan for H1 2024, a year-on-year increase of 3.7%, and a net profit attributable to shareholders of 1.875 billion yuan, up 10.6% year-on-year, exceeding expectations. The company plans to distribute an interim dividend of 0.16 HKD per share, representing a year-on-year increase of 21.0%, with a high payout ratio of 78% [3] - Despite a weak industry demand and intense competition, the company is recognized as a leader in the Chinese infant formula market, with a continuous increase in market share and solid brand and channel advantages, maintaining the "Buy" rating [3] Summary by Sections Financial Performance - In H1 2024, the company's gross margin improved to 67.9%, an increase of 2.6 percentage points year-on-year, primarily due to the revenue growth of high-margin products. The net profit margin for H1 2024 was 18.9%, up 2.3 percentage points year-on-year [5] - The company has adjusted its net profit forecasts for 2024-2025 to 3.81 billion and 4.16 billion yuan, respectively, down from previous estimates of 4.82 billion and 5.28 billion yuan, while introducing a new estimate of 4.47 billion yuan for 2026 [3][7] Product and Market Strategy - The company is focusing on promoting the Xingfeifan and Zhuorui product lines, launching new products in line with market trends, and achieving good terminal sales. As of H1 2024, offline distribution accounted for 76.8% of total dairy product revenue, with over 2,800 distributors covering more than 80,000 retail points [4] - The company is also targeting the younger generation through the rapidly growing e-commerce channel and has conducted approximately 460,000 seminars to engage new customers [4] Future Outlook - Looking ahead, the company plans to continue expanding its ultra-premium and premium+ product lines, optimizing its product structure, maintaining reasonable discount levels, and actively improving cost efficiency, which is expected to enhance profitability in 2024 [6]

Investment Rating - The report maintains a "Buy" rating for the company [4]. Core Views - The company's revenue for H1 2024 reached 10.095 billion yuan, an increase of 3.70%, while net profit attributable to shareholders was 1.875 billion yuan, up by 10.56% [3]. - The company plans to distribute an interim dividend of 0.1632 HKD per share, totaling approximately 1.48 billion HKD, equivalent to about 1.353 billion yuan, with a payout ratio of 72.15% [3]. - Channel reforms have shown effectiveness, with domestic revenue growing by 3.72% year-on-year [3]. - The company's online revenue share in dairy products increased by 1.00 percentage points year-on-year, with online and offline revenues of 7.753 billion yuan and 2.342 billion yuan, respectively [3]. - The company has improved its production capacity, with a designed annual capacity of approximately 363,000 tons, an increase of 11.01% year-on-year [3]. - The gross profit margin for H1 2024 was 67.88%, up by 2.56 percentage points, driven by lower raw material prices and increased sales of high-margin products [3]. - The company’s net profit margin for H1 2024 was 36.90%, an increase of 3.38 percentage points, attributed to improved gross margin and reduced expense ratios [3]. - The company is a leader in the infant formula industry in China, with ongoing product structure upgrades driven by strong R&D capabilities [3]. Financial Summary - The company’s projected net profits for 2024, 2025, and 2026 are 3.759 billion yuan, 3.979 billion yuan, and 4.194 billion yuan, respectively, with year-on-year growth rates of 10.88%, 5.84%, and 5.41% [4]. - The company’s PE ratios for 2024, 2025, and 2026 are projected to be 9, 8, and 8 times, respectively [4]. - The company’s revenue for 2024 is estimated at 20.394 billion yuan, reflecting a year-on-year growth of 4.41% [10].

Investment Rating - Maintain "Overweight" rating [1][3] Core Views - Feihe achieved revenue of RMB 10.095 billion in H1 2024, up 3.7% YoY, with net profit of RMB 1.911 billion, up 18.1% YoY [1] - Feihe maintained its leading position in China's infant formula market with a 19.2% market share across all channels [1] - The company's ultra-premium product Zhuo Rui saw an 80% revenue growth in H1 2024 [1] - Gross margin improved to 67.9% in H1 2024, up 2.6 percentage points YoY, driven by reduced discounts and improved product mix [1] - Feihe successfully expanded in coastal markets such as Guangdong, Fujian, and Shanghai, with significant growth in Shanghai [1] - The company plans to launch new products, including infant formula, nutritional products, and cheese products in H2 2024 [1] Financial Performance - H1 2024 revenue: RMB 10.095 billion (+3.7% YoY) [1] - H1 2024 net profit: RMB 1.911 billion (+18.1% YoY) [1] - H1 2024 gross margin: 67.9% (+2.6 ppts YoY) [1] - H1 2024 net margin: 18.9% (+2.3 ppts YoY) [1] - 2024E revenue: RMB 20.939 billion (+7.2% YoY) [2] - 2024E net profit: RMB 3.773 billion (+11.3% YoY) [2] Market Position - Feihe holds a 19.2% market share in China's infant formula market across all channels [1] - Offline channel market share: 22.7% [1] - Online channel market share: 13.8% [1] Product Strategy - Focus on premiumization, with Zhuo Rui driving growth in the ultra-premium segment [1] - Plans to launch new products, including infant formula, nutritional products, and cheese products in H2 2024 [1] Valuation - 2024E PE: 9x [1] - 2024E EPS: RMB 0.42 [1] - Current price: HKD 4.19 [3]