Key points of investment:
The company announced its 2023 performance forecast, which is in line with market expectations. According to the company's announcement, 1) In 2023, the company achieved net profit of 200-250 million yuan, a year-on-year increase of 66.54%-108.17% in the same period last year, a year-on-year increase of 66.54%-108.17%, net profit after deducting non-return to mother reached 111-140 million yuan, and a loss of -188 million yuan for the same period last year.
2) 2023Q4 achieved net profit attributable to mother - 24.64 million yuan to 25.36 million yuan, compared to 5.46 million yuan for the same period in 2022. 2023Q4 realized net profit not attributable to mother - RMB 1.04 million to RMB 18.96 million, with a loss of RMB 10.35 million for the same period in 2022.
Iteratively upgrade the content of the business format, and grasp major marketing nodes to boost customer flow. According to the company announcement and the company's official website, in 2023, the company refined the high-quality supply chain and continued to iteratively upgrade the store business format and content. On December 2, the Tianhong Shopping Mall, a subway building in Nanchang City, Jiangxi Province, opened. The stores grasped the characteristics of the regional location and increased the proportion of the catering and entertainment business to 75%. There were more than 80 restaurants, and upgraded from product structure and scene services. At the same time, the company closely grasped major marketing nodes such as Shuangjie and Shuangdan, coordinated national marketing, explored public domain platforms, promoted an effective increase in store traffic and platform traffic, and achieved year-on-year sales growth.
Eliminate loss-making stores to optimize costs and improve long-term profitability. By optimizing the cost structure, the company closes long-term loss-making stores, enhances the digital and intelligent application capabilities of the industry, and further improves profit levels. According to the company's announcement, in 2023, the company's net profit returned to mother increased by about 100 million yuan in the current period by closing long-term loss-making stores to confirm the disposal of right-to-use assets and loss of closing the store. In 2022, the company's sale of shares in Tianhong Weiwow Convenience Store (Shenzhen) Co., Ltd. affected the net profit to the mother increased by about 179 million yuan during the same period, while rent relief for merchants affected the net profit to the mother decreased by about 98 million yuan during the same period. Excluding the impact of the above matters, the company's net profit to mother increased by about 60 million yuan to 110 million yuan year-on-year in 2023.
Maintain a “buy” rating. The offline retail industry has shown a steady recovery trend since 23 years. Tianhong continues to strengthen digital construction, build a high-quality supply chain, and is optimistic about the improvement in long-term store operation capacity brought about by the iterative upgrading of the company's business format. Considering the uncertainty of store upgrades and adjustments and the impact of short-term pressure on the supermarket business format, we slightly lowered our profit forecast. We expect the company's net profit to be 2.30/288 billion yuan (original value was 2.82/3.20/349 million yuan) for 23-25, respectively, corresponding PE 25/23/20 times, maintaining a “buy” rating.
Risk warning: Consumption recovery falls short of expectations, digital construction costs exceed expectations, and store adjustments fall short of expectations.