Huaxi: Maintaining a "buy" rating for Ausnutria (01717), milk powder continues its downward trend.

Huaxi released a research report stating that it maintained a "buy" rating on AUSNUTRIA (01717), with revenue forecasts for 2024-2026 lowered from 79/84/89 billion yuan to 77/81/85 billion yuan; maintaining a net profit attributable to shareholders unchanged, with net profits of 2.8/3.7/4.6 billion yuan; maintaining EPS forecasts unchanged, with EPS of 0.16/0.21/0.26 yuan. The firm believes the company is likely to continue the trend of revenue performance improvement in the first half of the year, with goat milk powder revenue expected to continue its double-digit growth trend from the first half of the year, while cow milk powder may continue its adjustment trend from the first half of the year. According to news reports, some new national standard products have made adjustments to product names, product labels, etc. after registration, and companies are paying more attention to brand core strategies. Key points from Huaxi include: Clear strategic adjustment towards differentiation and branding According to data from the Baby and Child Research Institute, some new national standard products have made adjustments to product names, product labels, etc. after registration. The firm believes that the change in product names is to highlight brands rather than companies, such as the change from "Per Chun" to "Haipu Nuokai Zhi Zhuo" for Haipuno Kai Zhi Zhuo's product name; the change in label layout is to highlight the core features of the brand, such as the addition of the certification item "organic" on the label of Feihe Zhen Zhi Zhuo Bei. These adjustments indicate a clear focus from companies on highlighting brand and brand label strategies. Based on these strategic approaches and the company's interim report performance, the firm believes that the goat milk powder business is expected to continue its strong performance in the first half of the year, maintaining high double-digit growth throughout the year; as for milk powder, the firm believes that in 2024, it is expected to continue the strategy of "both cow and goat" under the ABB division and Haipu Nuokai business integration, judging that the trend of double-digit decline in the interim report will continue throughout the year. After adjustments in 2024, the company's milk powder business is expected to see more positive changes in 2025. Contribution of goat milk powder growth and weakening inventory provision impact, leading to improved profitability throughout the year Based on the firm's assessment of the company's various businesses, goat milk powder remains the core business driving the company's revenue and performance growth. Additionally, with the switch from old to new national standard products and industry-wide destocking adjustments expected to be completed in the second half of 2024, the firm expects the impact of inventory provisions on gross profit to significantly weaken, further promoting improved profitability throughout the year. Risks Risk of continuous decline in the number of newborns; food safety risks; risks of changes in raw milk prices; risks brought by intense competition in the industry, etc.