Incident: The company released its annual report and achieved revenue of 33.9 billion yuan in 2023, +5.5% year-on-year; net profit after deduction of non-return to mother was 3.72 billion yuan, +15.9% year-on-year.
Q4 profit fell short of expectations: after splitting 23Q4, the company's revenue was 2.96 billion yuan, -3.4% year on year; net profit after deducting non-return from mother was 800 million yuan, and losses increased by 220 million yuan over last year. Q4 profit was lower than we expected, mainly due to higher sales expenses and administrative expenses than we expected in Q4. Q4 The high cost of sales was due to the public opinion incident in October last year, which increased investment in product promotion, and the contraction of low-end products also lowered the cost-effectiveness ratio. Q4 The management costs are high because the company began implementing the corporate annuity plan on 2023/10/1 in accordance with national policy, with some one-time supplementary payments.
Fluctuations in sales volume during the year caused differences in expectations, while the product structure upgrade trend was stable: in 2023, the company's overall beer sales volume was -0.8% year over year, and ASP was +6.2% year over year. Sales of 8.01 million tons for the full year of 2023 remained stable compared to previous years, but showed high and low fluctuations during the year, mainly due to the liberalization of epidemic control and hot spots such as Zibo Barbecue, which made channel companies' expectations too high in the first half of the year, while the economic downturn in the second half of the year contracted consumption of low-end products. On the ASP side, despite last year's economic pressure, the increase in ASP in 2023 is satisfactory. Among them, the Qingdao brand maintained steady growth, with revenue +8.6% year over year, sales volume +2.7% year over year, and ASP +5.8% year over year; among them, sales of high-end products were +10.5% year over year, accounting for 40.4% of the company's total sales; in the middle and low end product segment, sales dropped slightly by -5% year on year, but ASP is still increasing.
Profitability continues to improve in 2023, and we are more optimistic about the profitability outlook for 2024: Looking at the full year of 2023, the company's profitability will continue to improve. The net interest rate for the whole year after deduction was 11%, +1pct year over year. Among them, gross margin was +1.8 pct year over year, sales expense ratio was +0.8 pct year over year, management expenses ratio was -0.1 pct year over year, and the share of other revenue remained stable. The increase in profitability mainly comes from the improvement of the product structure. Looking ahead to 2024, we expect the profit side to perform better in 2024 as the product structure continues to improve, the raw material cost side is deterministic, and the annual dimensional cost rate is manageable or optimized.
Increased normalized dividend ratio: According to the company's profit distribution plan, the company plans to distribute a cash dividend of 2 yuan per share in 2023, with a dividend payment rate of 64%, compared with the current stock price dividend rate of 2.4%. Since a special dividend for the 120th anniversary of the founding of the brand was implemented last year, if this part is not taken into account, the 2023 dividend ratio will increase compared to previous years.
Investment advice: Fluctuations in sales volume during 2023 caused the market to have poor expectations for the company, which is the main cause of stock price fluctuations; despite the economic downturn, the increase in ASP, which drives the company's performance growth, did not disappoint. Looking ahead to 2024, we are confident that the company's ASP will continue to improve. On the basis of lower raw material costs, the profit side may exceed expectations. We adjusted our profit forecast until 2024-2026, EPS of 3.83, 4.34, and 4.78 yuan, respectively, and the closing price of 2024/3/27 of 83.76 yuan corresponds to a P/E of 22/19/18 times, respectively. The current valuation is historically low, and the company has increased its dividend ratio and maintained a “recommended” rating.
Risk warning: Risk of lower end product sales falling beyond expectations; risk of ASP growth falling short of expectations.