Revenue performance was steady, and profits recovered and increased
The company released its annual report for 2023, achieving revenue/net profit/deducted non-net profit of 26.6/2.8/250 million, +2.8%/+6.2% year-on-year, corresponding to 23Q4 to achieve revenue/net profit/deducted non-net profit of 5.02/-0.25/ -0.32 million, revenue +9.1% year-on-year, and profit and loss year-on-year (22Q4 achieved net profit to mother of -0.32/-0.39 billion). On the product side, due to the slowing recovery of consumption power in '23, the cake business revenue grew slowly (+0.1% year over year); on the channel side, the company maintained a steady pace of store expansion, with online channels flowing with more than 700 offline stores across the country, and the group buying business steadily expanded; on the profit side, cost pressure on oil, grease, packaging materials, etc. improved year on year, and the proportion of homemade mooncakes increased (+1.9pct year on year).
Looking ahead to 24, the company will focus on increasing the net profit contribution of a single store, using high-margin cake products as a starting point to drive performance growth. EPS is expected to be 1.22/1.29/1.36 yuan in 24-26. Referring to the 24-year PE average value of 18x (Wind agrees), the 24-year PE will be given 18x PE, with a target price of 21.96 yuan, a “purchase”.
The share of cake categories declined slightly. Offline stores/online e-commerce channels continued to perform steadily by product. In 23, the company's cake/Chinese and Western pastry gift box/fruit/other businesses achieved revenue of 10.4/14.5/0.1/0.6 billion yuan respectively, +0.1%/+5.1%/-5.3% year-on-year, and the share of the cake business declined by -1.1 pct year on year. In '23, the company concentrated resources to develop and upgrade key products such as cakes, but due to the slowing recovery of consumption power, the share of cake categories declined. In '24, the company will use cake products as a starting point to increase the share of cake sales, and the price increase effect of some cake products in 23Q4 is expected to be released in '24. Looking at each channel, in '23, the company's offline store/online e-commerce business achieved revenue of 12.9/1.27 billion, respectively, +2.5%/+3.0%. The company maintained a steady pace of store expansion and expanded its direct and franchise store network; in '24, the company will continue to explore emerging markets, focusing on increasing the net profit contribution of single stores and reducing its dependence on group buying business.
The improvement in raw material costs/the increase in the ratio of homemade mooncakes led to gross margin of +1.9pct to 62.1% year over year, corresponding to 23Q4 gross margin +4.7pct to 63.3% year over year. The increase in gross margin for the whole year and 23Q4 was due to favorable factors such as year-on-year improvement in the cost of bulk raw materials such as grease, packaging materials, etc., and the increase in self-production ratio of mooncakes. In '23, the sales expense ratio was +1.9pct to 41.3% yoy (Q4 +2.1pct), and the management expense ratio was +0.4pct to 5.4% yoy (Q4 +0.7pct yoy). The increase in sales and management rates was mainly due to an increase in employment expenses; in the end, the net return rate for the full year was +0.1pct to 10.4% yoy. Looking ahead to 24 years, the cost side is expected to stabilize. The company will continue to adjust the internal labor efficiency ratio, promote accurate sales expenses, and further increase the proportion of central factories and homemade mooncakes, and the overall quality of the company's operations is expected to improve.
We are optimistic about the steady growth of the original company's performance and return in value. Maintaining the “buy” rating, the steady growth potential is expected to continue. Considering the slowdown in consumption recovery, we lowered our profit forecast. We lowered our profit forecast to be 1.22/1.29 yuan (previous 1.28/1.39 yuan) for 24-25, introduced a 26-year EPS of 1.36 yuan, and a target price of 21.96 yuan (previously 21.06 yuan) to maintain “buying”.
Risk warning: industry competition intensifies, macroeconomic performance falls short of expectations, food safety issues.