Key points of investment:
The company announced a pre-loss announcement for the 2023 annual results, and the results fell short of expectations. 1) In 2023, the company expects to achieve a net loss of 1.34 billion yuan to mother, and -2,763 billion yuan in the same period last year, an increase of 51.39% over the previous year. Non-net profit deducted from the mother was 1.97 billion yuan, which was -2,565 billion yuan in the same period last year, an increase of 23.2% over the previous year. 2) 23Q4 expects to achieve net loss to mother of -1,392 billion yuan, and -1,887 billion yuan for the same period last year; 23Q4 expects to achieve net profit deducted from mother of 1,595 billion yuan, compared to -1,923 billion yuan in the same period last year.
Upgrade the refined experience of offline stores, and calculate long-term asset impairment to affect profit performance. The company's management continued to promote store optimization and adjustment and closed some long-term loss-making stores. According to the company's official website, as of January 30, 2024, the company had opened a total of 1002 stores, a net decrease of 6 stores from June 2023. From December 2023 to January 2024, the company opened 10 stores one after another. The first Yunnan flagship store was successfully launched, and a total of 93 stores were prepared to be built in China. The company's new store will redesign the store scene, focus on fine management and optimization, and adopt a “one store, one discussion” customized transformation around the core logic of “product, scenario, and service” upgrade. At the same time, the company conducted an impairment test on long-term assets held at the end of the year. It is estimated that for 23 years, long-term equity investments and other long-term assets will be depreciated by 530 million yuan, affecting the company's profit performance.
Accelerate supply chain construction and strengthen digital management. The company continues to deepen its strategic positioning as a “fresh-based, customer-centered omni-channel digital retail platform”, focusing on improving supply chain efficiency and logistics and distribution efficiency, and improving the company's overall operation and management efficiency through store digitalization, employment digitalization, back-end management digitization, and refined user operations. The company invested about 670 million yuan in technology throughout the year. The company continues to promote various supply-chain changes such as supply chain digitalization, product structure optimization, supplier hierarchical management, etc., and stimulates employees' vitality to reduce costs and increase efficiency through measures such as continuously optimizing internal management processes and implementing new assessment systems.
Maintain a “buy” rating. The company has established core competitiveness by improving the fresh food supply chain and its own brand. In the future, we expect the company to continue to make every effort to build an omni-channel digital retail platform to further improve the quality of operations. Considering the impact of the company's asset impairment, the closure of loss-making stores, and the increase in technology investment on profits, we lowered the company's profit forecast. The company's revenue for 23-25 is estimated to be 793/846/88.8 billion yuan (original value: 875/910/95.3 billion yuan), and net profit to mother of -13.4/3.04 billion 618 billion yuan (original value was 1.63/56/ 870 billion yuan). According to the PS valuation of comparable companies Hongqi Chain, Jiajiayue, Tianhong Co., Ltd., and Zhongbai Group, the company was given 23 years Comparable to the company's average PS 0.34 times, corresponding to a target market value of 26.8 billion yuan, the current market value corresponds to 21% increase space, and maintains a “buy” rating.
Risk warning: Competition in the industry intensifies, business transformation falls short of expectations, and new store cultivation falls short of expectations.