Investment Rating - The investment rating for China Feihe (6186 HK) is Neutral, with a target price of HKD 3.40, indicating a potential downside of 12.1% from the current closing price of HKD 3.87 [1][10]. Core Insights - The sales recovery for China Feihe is heavily dependent on the success of digital retail initiatives and high-end product offerings. In 2023, the company experienced a net profit decline of 31% year-on-year, aligning with prior profit warnings. Sales revenue fell by 8.3% to RMB 19.53 billion, with net profit at RMB 3.39 billion, which was 5% higher than expectations [2][3]. - The company's high-end strategy aims to offset declining sales volumes, with premium products contributing significantly to revenue. The flagship product, Star Feifan Zhuorui, saw its revenue contribution rise from 8% to 21% in 2023. The company plans to continue this high-end focus with new product launches in 2024 [2][3]. - Digital retail initiatives have been implemented to enhance inventory management and pricing control, with a significant reduction in retail outlets from 41,000 to 23,000 by the end of 2023. The introduction of an "electronic fence" system in February 2024 aims to optimize inventory flow based on sales data [2][3]. Financial Summary - In 2023, China Feihe reported revenues of RMB 19.53 billion, a decrease of 8.3% year-on-year, with a net profit of RMB 3.39 billion, down 31% from the previous year. The gross margin for the second half of 2023 stabilized at 64.3% despite challenges [2][3][11]. - The company forecasts potential sales growth of 5% to double digits in 2024, with net profit expected to grow in line with sales [2][3]. - Key financial metrics for 2024E include revenue of RMB 20.80 billion, net profit of RMB 3.55 billion, and earnings per share of RMB 0.39, reflecting a slight recovery from 2023 [3][11].
销售复苏取决于数字化零售和高端产品的成功