Brief performance review
On March 29, the company announced that in 2023, revenue was 14.815 billion yuan, +5.53% year-on-year; net profit to mother was 1,337 billion yuan, +5.78% year-on-year. Q4 Revenue of 1,786 million yuan, -3.76% YoY; net profit attributable to mother - $0.07 billion (from profit to loss).
Management analysis
Sales grew faster than the industry in '23. The mid-range basic market was steady, and the structure was weak.
In '23, sales volume was 2.9975 million tons, +4.9% year-on-year; beer tonnage price +0.5% to 4,818 yuan.
By grade, high-end (8 yuan or more) /mainstream (4-8 yuan) /economy (4 yuan or less) revenue was +5.2%/5.6%/10.1%, of which amount was +4.0%/6.0%/3.8%, and price ratio +1.2%/-0.3%/+6.0%. High-end sales accounted for -0.4pct to 48% year-on-year, and revenue accounted for -0.2pct to 61.3% year-on-year. We believe that the company has been drinking for 23 years: 45% of non-current drinks:
55%, recovered year on year but there is still a gap compared to before (55%: 45% in '21). Overseas Usu and 1664 have a high degree of dependence on fresh drinks, and economic turbulence, and declined due to compounding their own channel reforms; regional brands Chongqing, Leburg, and Xinjiang Usu have benefited from the popularity of tourism, and Carlsberg's performance was outstanding.
Looking at the subregion, the northwest/central/southern region's revenue in 23 years was +1%/3%/14% year over year, and 23%/-4%/-14% year over year in 23Q4. Excluding the impact of the two new transfers from the northwest regions to the southern region, the northwest revenue growth rate is expected to return to double digits.
23Q4 sales volume was +4.7% year-on-year (down 7% compared to 21Q4), and tonnage revenue was -8% (flat compared to 21Q4), due to the recovery of investment discounts, compounded by 1664, and weakness in Q4 outside China.
Profits remained stable in '23, gross margin declined, and income tax rates improved.
The cost of a ton of beer in '23 was +3.2% (+5.9%), the cost of raw materials per ton was +6%, and the price of barley and packaging materials was expected to increase; net interest rate in '23 was -0.1 pct to 18.3% year over year, gross margin -1.3 pct year over year, sales/management rate +0.5/-0.5 pct year on year, advertising and marketing rate +0.3 pct, office and agency rates decreased; income tax rate -1.9pct to 19.7% yoy. 23Q4 net margin was -9.9pct yoy, of which gross margin was -6.8pct yoy, and sales/management rate was +4.9/0.4pct yoy.
According to the announcement, the company's target revenue growth for 24 years is medium to high single digits. The changes are reflected in 3 aspects. Waiting for the results of the peak season: 1) the big cities plan to focus on quality and re-screen key cities to make more detailed investments; 2) more than 100 new sales staff will be added in 24 to make up for channel shortcomings; 3) support for dealers and terminals will increase, enhancing the channel enthusiasm of major products such as Wusu. Barley procurement was completed in '24, and dividends were gradually released. After the Foshan plant was put into operation, depreciation and amortization was added, and the cost per ton is expected to enter a downward range.
Profit Forecasts, Valuations, and Ratings
Considering the company's reform progress and demand environment, we lowered our 24-25 forecast by 16% and 21%, and introduced a 26-year profit forecast. We expect revenue growth of 6%/6%/6%, profit growth of 8%/9%/8%, EPS of 2.98/3.24/3.51 yuan, corresponding PE of 22/20/18X, maintaining a “buy” rating.
Risk warning
Channel reforms have fallen short of expectations; market competition has intensified; there is a risk that raw materials will rise too fast.