3Q rev/np +3%/59%; cost cut was key to profit growth

（以下内容从招银国际《3Q rev/np +3%/59%; cost cut was key to profit growth》研报附件原文摘录）
伊利股份(600887)
Yili’s 3Q revenue/net profit stood at RMB31.2/3.1bn, up +2.7%/59.5%, and bothcame in in line with our estimates. The former was largely driven by a sequentialacceleration in liquid milk sales to +8.5% YoY (from -2.6%/+0.5% in 1Q/2Q) thatoffset a rather disappointing momentum in low-temp/IMF sales (-35.7%/-3.9%YoY). Meanwhile, the latter grew off a low comps with a 1.6pp expansion inGPM, along with a notable 1.6pp decline in opex ratio which we previouslyasserted it to be a major earnings growth driver. Management has guided downfull-year sales growth target to MSD% (from low-teen), and we believe thiswould not come in as a total surprise to the market, given consensus growth hasalready trimmed down to HSD% since 1H results. Separately, management alsosounded realistically positive on 4Q and even on 2024E outlook with anactionable roadmap to gain market share in each segment. We remain Buyer ofYili.
Outlook by segment. Management expects single-digit growth in liquidmilk for 2023, considering the timing difference between 2023 and 2024CNY that impacts the timing of restocking among distributors. The premiumSatine brand should keep its double-digit sales growth and furtheraccelerate in 2024. IMF should deliver QoQ improvement as new productsintroduced since August were well-received. Considering also the exit ofsmall players amid industry consolidation, October sales have alreadyreturned to positive growth. The adult milk formula has fared well. Lowtemp business dipped in 3Q due to seasonality and a lower-than-expectedtemperature nationwide. That said, given the segment’s insignificantcontribution over 2H, management still sees double-digit growth potentialfor the full year.
Earnings change. We slightly trim our 2023E revenue by 2.9%, driven bya 7.8% cut in IMF sales, followed by a 6.7%/0.5% cut in low-temp dairy andliquid milk sales. Separately, we raise our GPM by 0.2pp to reflect an easinginput cost pressure, and this should partially offset the impact of a slowertop-line growth. Our net profit estimate is 1.5% lower.
Valuation. Our revise TP to RMB34.5 (from previously RMB36.5) based onan updated 20.5x (from previously 21.0x) roll-forwarded mid-24E P/E, whichstill benchmarks to -1sd below average. We value both Mengniu (2319 HK,BUY), Yili (600887 CH, BUY) and Feihe (6186 HK, HOLD) at -1sd belowaverage, in view of lukewarm dairy demand, especially that for IMF, amid afaltering consumption recovery.