Introduction to this report:
The company closed some long-term loss-making stores and depreciation due to lower second-tier stock prices, putting pressure on the 2023 results. However, with a steady basic market, continued promotion of store optimization and adjustment, and firm in the Yonghui Technology Strategy, the company is expected to recover steadily in 2024.
Key points of investment:
Maintain an increase in holdings. Taking into account appropriate adjustments to the speed of store opening, EPS was lowered to -0.15/0.04/0.08 yuan in 23/24/25 (previous value was 0.02/0.05/0.09 yuan), giving a valuation of 0.36xPS slightly lower than the 2024 industry average, and lowering the target price by 3.6 yuan (previous value was 4.2 yuan) to maintain the increase in holdings.
Performance summary: Net profit due to mother is expected to be -1.34 billion yuan in 2023, a loss reduction of 1.42 billion yuan compared with the same period last year. Non-net profit deducted - $1.97 billion, a decrease of $60 billion compared with the same period last year. Net profit for Q4 was $1,392 million, a decrease of 485 million yuan compared with the same period last year. Non-net profit deducted - $1,595 million, a decrease of $328 million compared with the same period last year
Store optimization and adjustments continue to be promoted, and lower secondary stock prices have led to accrual depreciation. The retail industry still faced tremendous competitive pressure in 2023. The company's management continued to promote store optimization and adjustment, and closed some stores that had been losing money for a long time. Affected by the continued decline in stock prices in the domestic secondary market, the company conducted an impairment test on long-term assets held at the end of the year in accordance with accounting standards. According to preliminary estimates, the company is expected to accrue long-term equity investments and other long-term assets depreciation of about 530 million yuan this year.
The basic business market has not yet been affected, and the strategy for the development of Yonghui Science and Technology is firm. The company's basic market is stable, and various supply-chain changes such as supply chain digitalization, product structure optimization, and supplier hierarchical management are continuously promoted. Steady Technology's Yonghui strategy invests about 670 million yuan throughout the year to improve the company's overall operation and management efficiency in all aspects through store digitalization, employment digitization, back-end management digitization, and refined user operations.
Risk warning: The macroeconomic economy is declining, consumer confidence is insufficient; store expansion falls short of expectations.