The 2022 results are in line with our expectations
The company announced 2022 results: 2022 revenue -1.9% year-on-year; net profit attributable to the mother/net profit after deducting non-return to the mother was -49.0/ -7.6%, respectively; gross margins, sales expenses ratio/management expenses ratio/net profit margins to the mother, net profit margins after deducting the return to the mother were +1.4/+0.5/+1.4/-10.9/-0.6ppt respectively.
Revenue for 4Q22 alone was -7.4% year-on-year; net profit after deducting non-return to the mother was -75.7/ -7.2%, respectively; gross margins, sales expenses ratio/management expenses ratio/net profit margins of return to the mother/net profit margin after deducting non-homing net profit margins were +9.6/+4.9/+2.1/-30.8/+0.0ppt, respectively. This performance is in line with our expectations.
Development trends
Due to limited consumption scenarios, the rice wine sector is still in a downward cycle, and the company's revenue performance is better than that of the industry as a whole.
The company's revenue in 2022 was -1.9% year-on-year, with 4Q22 revenue falling 7.4% due to the impact of the epidemic (Jiangsu/Zhejiang/Shanghai annual revenue was -7.2/-0.8/ -4.4%, respectively), which was better than the performance of rice wine companies regulated in 2022 of 10.163 billion yuan, which was -20.1% year-on-year; structural aspects: the volume/price of medium to high-end rice wine was -7.6/ 1.2% year-on-year, and the volume/price of ordinary rice wine was 2.6/ 2.5% year-on-year, and the trend of ordinary rice wine restoration process was faster than middle and high-end rice wine, continuing the company's revenue trend. The phased downturn in the structure, and after the optimization of the epidemic policy, the restoration of social scenarios and other scenarios is worth paying attention to in boosting the structure.
Cost pressure has abated, and the company's more aggressive spending has led to a slight decline in its net interest rate.
In 2022, the company's packaging materials/brewing raw materials costs fell 16.99/ 25.47% year on year. Driven by the decline in the cost of packaging materials and brewing raw materials such as rice and corn, the company's gross margin increased +1.4ppt year on year; at the same time, the company increased advertising, which caused its sales expenses rate to rise 0.5ppt to 11.5%; management expenses rate rose slightly by 1.4ppt due to increased business hospitality expenses; combined with asset depreciation of 13 million yuan that occurred last year, the company's net interest rate fell 10.9ppt.
Looking ahead to 2023, we think the company's revenue and gross margin are expected to be resilient as social scenarios are repaired and costs are trending downward. The company came to a smooth end in 2022 after experiencing repeated changes in controlling shareholders due to repeated effects of the pandemic. Looking ahead to 2023, ordinary rice wine is relatively flexible in terms of volume and price; in the long run, we expect that if the company creates high-end products within the category, there may be room for further structural upgrades.
Profit forecasting and valuation
We introduced a profit forecast of $166/181 million for 2023/2024, an increase of 14.7%/9.1% over the same period. As market sentiment picked up and the industry valuation center moved upward, we raised our target price by 31.8% to 11.80 yuan, which is 3.83% downward from the current stock price; the target price corresponds to 33.7/31.1 times P/E in 2023/2024, and the current stock price corresponds to 35.4/32.5 times P/E in 2023/2024, maintaining a neutral rating.
risks
The company's restructuring fell short of expectations, causing operating risks in the main business; scenario recovery was slower than expected; raw material costs fluctuated; if revenue in Zhejiang, a niche market, declined, expansion outside the province would also be under pressure; food safety.