YILI(SH:600887) CSC SECURITIES (HK) LTD·2024-10-31 04:31Investment Rating - The report assigns a "BUY" rating for Yili Group (伊利股份) with a target price of 31 CNY [1]. Core Insights - The company reported a total revenue of 89.04 billion CNY for the first three quarters of 2024, a year-on-year decrease of 8.6%, while the net profit attributable to shareholders reached 10.87 billion CNY, an increase of 15.9% [1]. - The third quarter performance exceeded expectations, with revenue of 29.12 billion CNY, down 6.7% year-on-year, and a net profit of 3.34 billion CNY, up 8.5% year-on-year [1]. - The report highlights that the channel adjustments have concluded, and the low prices of raw milk have positively impacted profitability [5][6]. Summary by Sections Company Overview - Yili Group operates in the food and beverage industry, with a current stock price of 26.44 CNY as of October 30, 2024 [1]. - The company has a market capitalization of approximately 167.48 billion CNY and a price-to-book ratio of 2.99 [1]. Financial Performance - The revenue breakdown for Q3 shows liquid milk contributing 20.64 billion CNY (down 10.3% year-on-year), milk powder and dairy products at 6.82 billion CNY (up 6.6% year-on-year), and cold drinks at 1.02 billion CNY (down 16.7% year-on-year) [5]. - The gross margin for Q3 improved by 2.4 percentage points to 35%, attributed to low raw milk prices and improved product freshness following channel adjustments [5]. Profitability Forecast - The report slightly raises profit forecasts, expecting net profits of 12.22 billion CNY, 13.74 billion CNY, and 15.02 billion CNY for 2024, 2025, and 2026 respectively, with year-on-year growth rates of 17.2%, 12.4%, and 9.4% [6][7]. - Earnings per share (EPS) are projected to be 1.92 CNY, 2.16 CNY, and 2.36 CNY for the same years, with corresponding price-to-earnings (P/E) ratios of 14, 12, and 11 [6][7].