The company's 2023 revenue decreased by 0.32% year on year, and net profit to mother increased by 88.75% year on March 14. On March 14, the company announced its 2023 annual report: in 2023, it achieved operating income of 12.086 billion yuan, a year-on-year decrease of 0.32%, and realized net profit of 227 million yuan due to fully diluted EPS, an increase of 88.75% year on year, achieving net profit after deducting non-return mother of 128 million yuan, turning a loss into a profit.

Looking at the single-quarter split, 4Q2023 achieved operating income of 2,835 billion yuan, a year-on-year decrease of 2.34%, and realized net profit of 0.2 billion yuan, converted to fully diluted EPS of 0.002 yuan, a year-on-year decrease of 62.70%, and realized net profit deducted from non-return to mother of 0.07 billion yuan, or -10 billion yuan for the same period last year, turning a loss into a profit.

The company's comprehensive gross margin increased by 1.46 percentage points in 2023, the expense ratio decreased by 0.74 percentage points, and the company's comprehensive gross margin in 2023 was 38.26%, up 1.46 percentage points from the previous year. Looking at the single-quarter split, 4Q2023's comprehensive gross margin was 40.78%, up 2.51 percentage points from the previous year.

The company's expense ratio for the 2023 period was 37.04%, down 0.74 percentage points year on year. Among them, sales/management/finance/R&D expenses were 32.12%/3.14%/1.10%/0.68%, respectively, with a year-on-year change of +0.22/+0.12/-1.00/ -0.07 percentage points, respectively. The 4Q2023 company's expense ratio for the period was 38.61%, down 0.45 percentage points year on year. Among them, sales/management/finance/R&D expenses were 34.84%/3.48%/-0.33%/0.61%, respectively, with year-on-year changes of +1.74/ +0.34/ -2.28/ -0.25 percentage points, respectively.

Major offline stores were upgraded, department stores were transformed into community stores. Online business and membership grew rapidly. In 2023, the company had a net increase of 1 shopping center, a net decrease of 3 department stores and 3 supermarkets. By the end of 2023, the company operated 41 shopping malls, 59 department stores, and 116 supermarkets, of which the company's own property accounts for about 13.52%; a total of 9 reserve projects have been signed to open, including 7 shopping centers and 2 supermarkets. In terms of store adjustments, the company promoted major store upgrades, and department stores were transformed into community living centers. On the online side, the company's total GMV revenue from online product sales and digital services in 2023 was 5.44 billion yuan. In terms of membership, in 2023, the number of digital members in the company exceeded 47 million, the number of monthly active members in apps and applets exceeded 4 million, member sales increased 10% year on year, and the number of consumer members increased 8.2% year on year.

Maintain profit forecasts and maintain “buy” ratings

The company's performance is basically in line with the performance forecast issued by the company on January 22 (estimated to achieve net profit of 200 million yuan to 250 million yuan). We maintain our 2024/2025 EPS forecast of 0.21/0.23 yuan, and added a forecast of 0.25 yuan for the company's 2026 EPS. The company actively adjusts stores, develops online business rapidly, continuously improves the membership system, and maintains a “buy” rating.

Risk warning: Some store leases cannot be renewed when they expire, and the pace of new business formats and new store expansion falls short of expectations.