Incident: The company released its 2022 annual report, achieving revenue of 2,343 million yuan, a year-on-year decrease of 18.3%, and realized profit attributable to the company's shareholders of 25 million yuan, a year-on-year decrease of 92.6%. The company's performance was in line with market expectations.
Investment rating and valuation: Considering that demand recovery fell short of expectations and cost pressure was greater than expected, prices of some duck by-products are still high year over year. We forecast gross margins for 23-25 to 51%/54%/55%, respectively (55/ 55% for the first time in 23-24), lower the profit forecast, add 25 years, and forecast that the company's net profit for 2023-2025 will be 212, 3.99 million yuan, 497 million yuan (401 million yuan and 491 million yuan the previous year in 23-24), up 738%, 88% and 25, respectively. %. The latest closing prices correspond to PE 33x, 18x, and 14x respectively in 23-25. Although the company faced phased cost pressure, the company's store expansion was in line with expectations and maintained an increase in holdings rating.
The company continues to deepen six major strategic reforms, open up franchises, increase store expansion efforts, refine the operation of takeout business to expand the radiation radius of stores, actively expand new channels to reach young customers, enrich the product matrix to form a new generation of large products, and optimize the supply chain to reduce costs and increase efficiency. In the short term, we focus on the high elasticity of recovering store efficiency, and in the medium to long term, we focus on the greater space brought by the company's online and offline omni-channels to reach consumers in depth.
The efficiency of single-store stores is under pressure in the short term, community store types are expanding at an accelerated pace, and store expansion is in line with expectations. Looking at each channel, self-operated stores/online channel/franchise businesses achieved revenue of 11.55/417/693 million yuan respectively in '22, a year-on-year change of -29.7%/-24.0%/17.1%, respectively. Looking at the split of stores, the average single-store revenue of direct-run stores/franchise stores in '22 was -37%/-27%, respectively, mainly due to the decline in traffic, but the company's store expansion was basically in line with expectations. By the end of the reporting period, the company had 3,429 stores, of which 1,46/1893 were direct-run store/franchised stores respectively, a net increase of 200/358 over the previous year. The company now covers 319 cities. In terms of urban hierarchical distribution, the company accelerated the layout of Tier 3, 4 and 5 cities. Compared with 2019, the number of Tier 3, 4, and 5 cities accounted for the number of Tier 3, 4 and 5 cities Improve 17.1 pct to 31.1%. Looking at the store structure, the transportation hub store/business district complex store/community store/others were 178 home/2099 home/792 home/360, compared to -36 home/191 home/467 home/26, respectively. The company optimized the store structure and accelerated the layout of the community scene.
Profitability is under short-term pressure under cost pressure. In '22, the company achieved a gross profit margin of 55.0%, a year-on-year decrease of 2.75pct. Of these, 22H1/22H2 achieved a gross profit margin of 56.9%/53.2% respectively, and -2.1pct/-3.3pct respectively. The main reason was that the price of duck fin was high. In terms of the expense ratio, the company's sales expenses fell 14.2% year on year, mainly due to the company's rent reduction negotiations, but due to the decline in revenue, the sales expense ratio increased 1.9 pct to 39.7%; the company achieved a management expenses rate of 13.2%, an increase of 2.4 pct over the previous year. The main reason was the further implementation of the incentive plan. Furthermore, the company experienced exchange losses of 23 million yuan (realized foreign exchange earnings of 53 million yuan in the same period last year). In summary, the company achieved a net interest rate of 1.08%, a year-on-year decrease of 10.85%.
Looking ahead to '23, revenue and profits are expected to recover. The company continues to optimize its store structure. It is expected that 1,000 new stores will be added in 2023, of which the total number of community stores will exceed 1,300. Furthermore, the company will also fill transportation hubs. In terms of same-store revenue, transportation hub stores have benefited from the recovery in travel traffic. The same store revenue exceeds the same period in '21, and high-potential business district stores are basically close to the same period in '21. There is a certain gap between general business district stores and community stores compared to the same period in '21. Considering that the consumption scenario has fully recovered, the company's closing rate is expected to be optimized, and there is still some room for improvement in same-store revenue. On the cost side, along with the increase in the number of female ducks that can be bred, duck prices have begun to decline sequentially, which is expected to contribute to profit elasticity in the future.
Core assumption risks: repeated epidemics have caused franchise business development to fall short of expectations, fluctuations in raw material prices, food safety issues