occurrences

On January 26, 2024, Huangshanghuang released the 2023 performance forecast.

Key points of investment

Higher year-on-year performance, mainly boosted by falling costs

The company released a performance forecast. In 2023, it is expected to achieve net profit of 0.65 to 75 million yuan, an increase of 111%-143%, and net profit after deducting non-return to mother of 0.43 to 53 million yuan, an increase of 913%-1148%. 2023Q4 is expected to achieve net profit of -0.36 billion yuan to -0.26 billion yuan, 2022Q4 net profit of -54 million yuan, net profit after deducting non-return to mother -0.44 billion yuan to -0.34 billion yuan, and 2022Q4 net profit of non-return to mother of -0.66 billion yuan.

We determine that it is mainly due to the year-on-year decline in costs, which unleashed performance elasticity; it is expected that the cost will remain slightly fluctuating in the low range in 2024.

The strategy of ten thousand stores is progressing steadily, and there is still plenty of room for store expansion

The company's strategy of thousands of stores is progressing steadily. We judge that the company will open more than 1,500 new stores in 2023, and we see that the domestic market is sinking and that there is still plenty of room to expand in markets outside the province. The company's store expansion is expected to accelerate further sequentially in 2024, and the number of the company's stores is expected to continue to expand. The rice products business has completed the handover of the management team. After taking over, Huang Shanghuang's team will improve investment efficiency and use the company's stores to assist in marketing. It is expected that it will continue to make a positive contribution to performance in the future.

Profit forecasting

In the short term, the company concentrated on eliminating poorly managed stores in 2023. The closing rate was slightly higher than in normal years; at the same time, the revenue situation of the same stores was slightly pressured by the impact of the external consumption environment. Looking at the medium term, in 2023, the company will focus on getting rid of the burden of poorly managed stores and going to battle lightly. We are optimistic that the company's operations will return to the right track starting in 2024. The stores are expanding rapidly, and the concentration continues to increase. We lowered our short-term profit forecast for 2023. We expect EPS to be 0.13/0.26/0.34 yuan respectively for 2023-2025, and the current stock price corresponding to PE is 72/36/28 times, respectively, maintaining a “buy” investment rating.

Risk warning

Downward macroeconomic risks, the pandemic is dragging down consumption, costs falling short of expectations, and the pace of opening stores falls short of expectations, etc.