YILI(600887) 浦银国际证券·2024-09-02 05:09Investment Rating - The investment rating for the company is downgraded to "Hold" due to concerns over limited profit growth potential in the slowing dairy market [1]. Core Views - The company is a leading player in the Chinese dairy industry with strong brand power and solid fundamentals. However, the slowing market demand raises concerns about future profit growth [1]. - The company's revenue growth is expected to remain in the mid-single digits over the next 2-3 years, with profit growth projected in the mid to high single digits. The current valuation lacks sufficient cost-effectiveness [1]. - The future revenue growth is contingent on the recovery of end-demand, with a cautious approach to shipment schedules in the second half of 2024 [1]. - The company aims to increase shareholder returns, transitioning from a growth stock to a value stock, with a dividend payout ratio not less than 70% [1]. Financial Summary - Revenue for 2022 was 123,171 million RMB, with a projected decline to 121,203 million RMB in 2024, reflecting a year-on-year change of -3.9% [2]. - Net profit for 2022 was 9,431 million RMB, expected to rise to 12,319 million RMB by 2024, indicating a year-on-year growth of 18.1% [2]. - The company's price-to-earnings ratio (P/E) is projected to be 12.9x for 2024 and 12.2x for 2026 [2]. - The return on equity (ROE) is expected to increase from 18.1% in 2022 to 20.9% in 2024 [2]. Operational Performance - In the first half of 2024, the company's liquid milk revenue declined by 13% year-on-year, while excluding inventory clearance effects, a single-digit decline is anticipated [1][5]. - The company reported a 7.3% year-on-year increase in milk powder revenue in the first half of 2024, outperforming most peers [1]. - The gross profit margin for the first half of 2024 was 34.4%, showing an improvement from 32.8% in the first half of 2023 [5][6]. Market Outlook - The company faces challenges in enhancing profitability due to limited cost reduction opportunities, with management targeting a stable profit margin for 2024 [1]. - The overall industry outlook remains uncertain, impacting the company's long-term revenue growth prospects [1].