On March 29, 2024, Huangshanghuang released the 2023 annual performance report.
Key points of investment
The year-on-year increase in performance was mainly due to falling costs and falling expenses, which boosted the company's revenue to reach 1,921 billion yuan (1.7% decrease) and net profit to mother of 171 million yuan (same increase of 129.05%) in 2023. Among them, 2023Q4 revenue was 340 million yuan (up 1.17% year on year), and net profit to mother was -30 billion yuan (loss decreased year on year).
The gross margin for the full year of 2023 was 29.06% (up 0.9 pct), of which 30.69% in 2023Q4 (6.4pcts). Net interest rate for the full year of 2023 was 3.45% (2.46pcts increase), of which 2023Q4 was -9.39% (year-on-year improvement). The year-on-year increase in profitability was mainly due to increased gross margin driven by improved company costs and proper rate control. The overall sales rate and management rate for the full year of 2023 decreased year-on-year, with a decrease of 1.43 pcts and a 0.47 pct increase, respectively. Net cash flow from operating activities in 2023 was $218 million (43% decrease).
The strategy of thousands of stores in a thousand cities is progressing steadily, and an inflection point for improving operating efficiency is beginning to appear
The company's strategy of thousands of stores is progressing steadily. By the end of 2023, the number of the company's stores reached 4,497, including 262 direct-run stores and 4235 franchise stores, a net decrease of 120 compared to 2023Q3. The company identified some stores with poor operating quality through relocation, closure, etc., and the overall quality of the stores has improved significantly. We judge that the closing rate will gradually return to normal levels from 2024. The internal and external markets of the province are vast, there is still plenty of room for store expansion, and the number of stores is expected to grow steadily in the future.
Profit forecasting
In the short term, the company's same-store revenue situation is slightly pressured by the external consumption environment, but from a medium-term perspective, we are optimistic that the company's operations will return to the right track starting in 2024. The stores have shown a rapid expansion trend, and concentration will continue to increase. We expect EPS to be 0.25/0.33 yuan in 2024-2025, and the current stock price corresponding to PE is 33/25 times, respectively, maintaining a “buy” investment rating.
Risk warning
Downward macroeconomic risks, the pandemic is dragging down consumption, costs falling short of expectations, and the pace of opening stores falls short of expectations, etc.