Incident: The company's 2023 revenue was 12.086 billion yuan, -0.32% YoY, and net profit to mother was 227 million yuan, +88.75% YoY. 2023Q4's revenue was $2,835 million, -2.34% YoY, and net profit to mother was $0.2 billion, or -62.70% YoY.

The shopping center business has recovered and the supermarket business has closed inefficient stores. By business type, shopping malls had revenue of 2,034 billion yuan in 2023, +17.46% year-on-year under a low base. Among them, comparable store revenue was +14.29% year-on-year, with a net increase of 1 to 41 stores. Department store revenue was 2.26 billion yuan, +2.77% year-on-year, of which comparable store revenue was +5.25%, and there was a net decrease of 3 to 59 stores. Supermarket revenue of 7.622 billion yuan, -4.04% year-on-year, had a certain relationship with the CPI slowdown and store adjustments. Among them, comparable store revenue was -4.01%, with a net decrease of 3 to 116 stores. The company's online business continues to develop. In 2023, supermarket door-to-door sales increased 2.3% year on year, accounting for 23.2% of sales, and shopping counter sales increased 14.35% year on year, accounting for more than 20.5% of sales. The company continues to explore public domain platforms, and has achieved GMV exceeding 1 billion yuan by selling vouchers on local lifestyle platforms such as Meituan and Douyin throughout the year.

Expense rates have declined slightly, and profitability has gradually increased. The company's gross margin in 2023 was +2.08pct to 38.26% year on year, the sales/management/R&D/finance expenses ratio was 32.12%/3.14%/0.68%/1.10%, +0.21/+0.12/-0.07/-1.00pct year on year, and the net margin was +0.89pct to 1.88% year on year.

Investment advice: The company is a traditional retail leader mainly in the shopping and supermarket business formats. In recent years, it has continued to promote business format upgrading and store content optimization, strengthen the construction of strategic core product groups, promote the second growth curve of online business and ToB business layout, and continue to improve its competitiveness. We forecast net profit to mother for 2024-2026 to be 2.53/2.80/308 million yuan, corresponding PE of 22.9/20.7/18.8 times, respectively, maintaining the “increase” rating.

Risk warning: the risk that macroeconomic consumption power will fall short of expectations; the risk that the company's market share and profitability will decline due to increased competition; the risk that channel changes will impact offline business models.