The company announced its 2023 results and achieved net profit of 180 million yuan. Looking at the year-on-year loss, the 2023 company achieved revenue of 1.21 billion yuan (yoy -23%), achieved net profit of 180 million yuan, turned a year-on-year loss into a profit, and achieved an adjusted net profit of about 280 million yuan. The decline in revenue is mainly due to the successive shutdowns of inefficient direct-run stores. Since the beginning of 2023, the company has implemented a profit-centered business philosophy, increased prudence in daily operations, and shut down inefficient stores one after another. In 2023H1/2023H2, 114/174 stores were closed, respectively. Is the profit reversal mainly due to the recovery in passenger flow and the improvement in operating efficiency after consumption recovery? The “Hi Beer Partner” program is progressing smoothly. Currently, 383 companies have been signed in mid-2023. The company officially announced the “Hi Beer Partner” program and announced the models and plans for all new member stores.
In terms of store types, there are 3 types of stores, including boutiques of about 100 square meters, premium stores of about 200 square meters, and premium stores of about 250 square meters. Combined with mainstream pub stores in the market, we expect premium stores to become mainstream franchisees.
1) Store efficiency: The average daily yield of “Hi Beer Partner” is about 34 yuan/square meter for a single store, which is much higher than that of direct-run stores. In the subregion, the daily sales of “Hi Beer Partner” stores in Tier 1 and 2 cities in 2023 were 0.94/0.77 million yuan respectively, which is significantly higher than that of direct-run stores. Considering that “Hi Beer Partner” stores have lower operating costs through social resources, we expect their actual profit level to be significantly higher than that of direct-run stores.
1) Store opening side: As of March 28, '24, the number of contracted stores was 383, of which 188 had already been opened, which is progressing smoothly. Less than a year after the official announcement of the “Hi Beer Partner” program, nearly 200 stores have been opened.
We believe this is an expression of the company's brand strength. Helens's brand positioning directly hits the county market, which lacks the dual pain point of “space” + “cost-effective products”. It has the dual advantages of brand and capital, and has the opportunity to reduce maintenance in the county market. Driven by excellent profitability, we anticipate that “Hi Beer Partner” stores will continue to rapidly expand, and it is expected that about 400 new stores will be opened during the year.
Profit forecasting and valuation
The company is the leading bistro circuit in China. After adjustments, the company has now entered a period of steady development. With the launch of the new Hi-Beer partnership model, combined with leading brands and scale advantages in segmented racetracks, we expect that the company's store expansion will accelerate and profit flexibility will continue to be unleashed. The company's net profit for 2024-2026 is expected to be 3.09/350/449 million yuan, respectively, with a year-on-year increase of 71%/13%/28% in 2024-2026; the corresponding PE is 12/11/8 times, respectively. Considering the excellent and full potential of the Helens industry, it maintains a “buy” rating.
Risk warning: macroeconomic downturn, food safety, store expansion falling short of expectations, miscalculation of individual stores, etc.