The company is expected to achieve net profit of 15 million yuan to 22 million yuan in 2023
The company announced the 2023 annual results pre-profit announcement: In 2023, the company expects to achieve net profit of 15 million yuan to 22 million yuan (net profit to mother of -15.94 million yuan for the same period in 2022), turning a loss into a profit. In 2023, the company expects to achieve net profit after deducting non-return to mother of RMB 0.0 million to RMB 7 million (net profit of -258.34 million yuan in the same period of 2022), turning a loss into a profit.
On a quarterly basis, we estimate that the 4Q2023 company achieved net profit of 1.77 million yuan to 5.23 million yuan, and net profit to mother of -102.5 million yuan for the same period in 2022. We estimate that the 4Q2023 company achieved net profit from deducted non-return to mother - 2.33 million yuan to 4.67 million yuan, and net profit deducted from non-return to mother for the same period in 2022 was -128.65 million yuan.
Turn losses into profits, and continuously improve management efficiency
The company's profit in 2023 turned a loss into a profit, mainly due to: 1) In 2023, the company's stores seized consumer opportunities, combined their own characteristics, and carried out relevant themed marketing activities for different consumption points. The store introduced traffic brands, formed a differentiated competitive advantage by creating a regional “first store in the first city”, and built a gathering area for influencers to check in, trendy night markets, children's entertainment, education and training, etc., to attract customers to spend in stores.
2) The company further reduces costs and increases efficiency, and strengthens cost management. For example, in the upgrading and transformation of stores, some of the original outsourced work was carried out in-house to save costs; when purchasing projects and items, save costs by comparing centralized bidding; step up supervision of low-selling products and reduce inventory; rationally adjust existing brand deductions to increase profits; and reduce negative gross profit through margin protection and sales price linkage mechanisms.
3) The company has increased the gross profit margin of some products through direct procurement from the source and direct connection with suppliers. At the same time, the company promotes “zero supply relationships” through the “Eurasian Zero Supply” platform service provider, and summarizes, analyzes, traceability and predicts business processes through management tools such as “Eurasian Manager” and “Eurasian Assistant”, thus further improving the company's management efficiency.
Raise profit forecast to “buy” rating
Our previous forecast for the company's net profit to mother fell at the lower limit of the company's earnings pre-profit announcement. The company's 2023 performance slightly exceeded our expectations, mainly because the company strengthened cost control and further improved the company's gross profit margin through direct source procurement, etc., and the company's profitability continued to improve. We raised our forecast for the company's 2023/2024/2025 EPS by 19%/20%/24% to 0.11/0.12/0.14 yuan. The company has a strong competitive position in places such as Changchun. The proportion of owned properties is high, the property value is high, and the PB is 0.8 times relatively low. It has a certain investment value in the long run, and has been upgraded to a “buy” rating.
Risk warning: Regional economic growth falls short of expectations, and the operating conditions of major stores in Eurasia have fallen short of expectations.