The results of '22 were under pressure, and many adverse factors, both internal and external, led to losses. The company achieved revenue of 90.9 billion yuan (yoy -1.1%) in 2022 and net profit of -2.76 billion yuan (loss reduced by 29.9%), and performance continued to be under pressure. The main reasons for the company's continued losses in 2022 include: 1) the social responsibility of “securing supply and stabilizing prices” during the pandemic, and gross margin was affected; 2) disposal of financial assets resulted in investment losses of 120 million dollars; 3) the depreciation of long-term equity investment was calculated by 200 million yuan; 4) the depreciation of long-term losses and preparations for closing stores was 440 million yuan.
The business environment improved, and 23Q1 profits improved. The company's 2023Q1 revenue was 23.80 billion yuan (YOY -12.6%), and the net profit of the mother was 7.0 billion yuan (YOY +40.2%), reversing losses on a month-on-month basis. The company's 23Q1 gross profit margin was 22.9% (yoy+1.6pct), returning to a high level before the pandemic, the highest level in a single quarter since 2019. As the impact of the pandemic gradually subsides, we expect the company's profits to enter an improvement channel.
Omnichannel has been transformed and upgraded, and the scale of online business is already here. The company achieved online business revenue of 15.936 billion yuan (YOY +21.37%) in 2022, accounting for 17.69%, with an average daily order volume of 518,000 orders. The omni-channel transformation and upgrading is progressing steadily. “Yonghui Life”'s self-operated home delivery business has covered 984 stores, achieving sales of 8.8 billion yuan, an increase of 24% over the previous year, with an average daily order volume of 316,000, and an average monthly repurchase rate of 51.5%. The third-party platform's door-to-door business has covered 958 stores, achieving sales of 7.12 billion yuan and an average daily order volume of 202,000. Furthermore, the number of registered members of the company “Yonghui Life” reached 101 million (YOY +18.73%), and the average number of online monthly active members reached 126.67 million, beginning to form a large-scale stable membership system.
Start an iterative transformation of stores and select high-quality store properties. In 2022, the company opened 36 new Bravo stores, closed 60 Bravo business style stores, and signed 10 new contracts. By the end of 2022, the supermarket business had entered 29 provinces and cities across the country, with 1,033 supermarket stores; 2023Q1 opened 2 new stores. In an environment where the trend in the domestic offline retail business industry is declining, the company began an era of store iteration by selecting+selecting high-quality store properties and eliminating the closure of some of the final stores.
Due to changes in the competitive environment of various retail channels, the adjusted company's net profit forecast for 23-25 was 2,465/967 million yuan (originally 997/1,267/100 million yuan), and EPS was 0.03/0.06/0.11 yuan (originally 0.11/0.14/- yuan). Using the FCFF absolute valuation method, the target price is 3.71 yuan to maintain the “buy” rating.
Risk warning
Macroeconomic fluctuations; increased market competition; store expansion fell short of expectations; online business fell short of expectations