Key points of investment
The company announced 2023 results, and net profit reversed losses year-on-year
Looking at the full year of 2023, the company achieved revenue of 686 million US dollars (yoy +23%) and achieved net profit of 25.26 million US dollars, turning a year-on-year loss into a profit. Revenue growth is mainly due to the continuous recovery and recovery of the consumer market in overseas business regions, driving the upward turnover rate, and the reversal of net profit losses stemming from the optimization of the store model. Looking at 2023H2 alone, the company achieved revenue of 362 million US dollars (yoy +16%) and realized net profit of 21.87 million US dollars. Net profit has been positive for 3 and a half years in a row since 2022H2. The main reason for the continuous reversal of net profit losses is that the upward turnover rate has led to a significant improvement in the share of employee costs, continuous optimization of the share of rent costs, and a significant optimization of the share of depreciation and amortization expenses.
Profitability continues to improve. In terms of 2023H2 achieving a net profit margin of about 6%, the company achieved a gross profit margin of 65.8%, an improvement of 1 pcts year over year. We expect this is mainly due to the optimization of procurement costs and the strengthening of store management. In terms of expense ratios, the share of employee costs/actual rental costs/other depreciation and amortization improved by 0.9/1.3/1.2pcts year-on-year respectively in 2023. We expect this is mainly due to a natural decline in the share of rigid costs due to rising income. In terms of net interest rates, driven by increased profit margins at the restaurant level, 2023H2 achieved a net interest rate of 6.0%, demonstrating profitability. After deducting exchange gains and losses, 2022 H2/2023H1/2023H2 achieved net interest rates of 2.8%/4.4%/4.5% after deducting exchange gains and losses, respectively, and have increased for 3 and a half years in a row, demonstrating operating strength.
The turnover rate has led to an increase in profit margins, and store openings are speeding up
1) The turnover rate continues to rise in each region, leading to the release of profits. Looking at the subregions, the Southeast Asia/East Asia/North America regions were 3.5/3.6/3.7 times per day for the full year of 2023, up 0.1/0.6/0.6 times per day, respectively. The increase was also significant from a month-on-month perspective. We believe that the general rise in various regions is mainly based on the gradual emergence of the company's proper localization strategy, scale advantage, and refined management capabilities. As the turnover rate continues to rise, profit margins at the restaurant level continue to rise. 2022 A/2023H1/2023A companies achieved restaurant-level profit margins of 4.1%/8.3%/9.0% respectively. In the future, as operating capacity is further demonstrated, the turnover rate will rise further, and profit flexibility is expected to be further unleashed.
2) Since the beginning of the year, the company has opened 3 new stores, and the opening of stores is speeding up. Since the beginning of the year, the company is expected to have opened 3 new stores, located in Canada/Philippines/Thailand. Compared to the net opening of only 4 stores in 2023, the pace of opening stores has accelerated markedly, combined with the current pace of opening stores. We expect the company's 2024 store opening growth rate to surpass last year, and the number of store openings is expected to reach double digits. Furthermore, the current total number of the company's stores is still less than 120. From a long-term perspective, the global layout and opening space is still broad.
Profit forecasting and valuation
As a leading overseas Chinese food brand, the company has broad prospects along with the recovery of overseas consumption and is empowered by brand advantages and the establishment of a new supply chain. We expect the company to achieve net profit of 48/66/79 million dollars in 2024-2026, with a growth rate of 88%/38%/18% in 2024-2026, corresponding to PE 23/17/14 times, respectively. In line with the company's development stage, we maintain an “gain” rating.
Risk warning: macroeconomic downturn, food safety, store expansion falling short of expectations, etc.