Incident: The company's revenue in 2023 was +0.7%, net profit to mother +11.9% YoY. The company released an annual report: in 2023, it achieved revenue of 11.391 billion yuan (+0.7% YoY) and net profit to mother of 362 million yuan (+11.9% YoY). Taking into account the company's investment in brand renewal, we lowered the company's 2024-2025 profit forecast and added a 2026 profit forecast. The net profit for 2024-2026 is 3.44 (-0.14) /4.15 (-0.08) /516 million yuan, corresponding EPS is 0.22 (-0.01) /0.26 (-0.00) /0.32 yuan, and the current stock price is 13.8/11.4/9.2 times PE. We believe that the company has launched a ten-year strategy to continue to strengthen core competitiveness such as channels, supply chain and brand image. In the future, franchise chain stores will contribute to steady growth as ballast stones, and the ToB business is expected to open up new growth space, have reasonable valuations, and maintain a “buy” rating.
In 2023, three major business groups were established to promote the overall development of the group. In 2023, the channel scale was steadily expanded. The organizational structure of the group strategically optimized business operations, and the division was reorganized into three major business groups: retail business group, 2B business group, and category business group to better meet the Group's long-term growth goals and improve efficiency.
(1) Retail business group: 443 net stores were opened in 2023 (450 were joined, 7 were directly managed), and the total number of stores reached 6093 at the end of the period; in addition, the OMO model continued to develop, with a cumulative total of 83.91 million members (+13% year over year), and the number of paid members reached 1.17 million (+21% year over year), and online channels accounted for about 27.6% of the total number of orders.
(2) 2B business group: In November 2023, the company achieved holding shares in Shenzhen Banguo; Shenzhen Banguo's total commodity transactions reached 3,068 billion yuan in 2023, which is expected to strengthen synergy effects and expand market share in the 2B sector in the future.
(3) Category business group: In 2023, sales of the company's signature and grade A fruit accounted for 66.5% of the total retail sales of the store, the retail sales of its own brand fruit accounted for 14.0% of the total retail sales of the store, and the total number of brands of signature fruit's own products reached 37.
In terms of profitability, the company's gross margin in 2023 was 11.5% (-0.1pct), and the sales/management/R&D/finance expense ratios were 4.2%/2.8%/1.3%/0.1%, respectively, -0.2pct/-0.1pct/-0.1pct.
In 2024, we will shift to a high-quality growth strategy to strengthen core competitiveness such as channels, supply chains and brand image. In 2024, the company plans to shift to a high-quality growth strategy to comprehensively enhance the brand image through strategic renewal, enhanced signature fruit, and fruit gift box creation, etc., thereby further enhancing the profitability of retail stores, actively expanding 2B distribution channels, optimizing the supply chain system, and accelerating the digitalization of the entire operation and industry.
Risk warning: weak consumption, increased market competition, brand upgrades falling short of expectations, channel expansion falling short of expectations.