Performance Overview: Annual results were high and low, net profit to mother +12% year over year 23: revenue of 11.39 billion yuan (+1% year over year); net profit to mother of 360 million yuan (+12%).
23H2: Revenue of 5.10 billion yuan (-6%); net profit to mother of 100 million yuan (-22%).
The 23-year results showed a “high before and after” status, mainly due to the decline in the revenue of the company's franchised stores. In addition, considering the season for various types of fruit, we believe that the peak season for fruit consumption itself was also concentrated in the first half of the year.
Revenue split: Direct sales revenue growth rate is impressive. Same-store performance is split according to business: 11.07 billion yuan (+1%) of fruit and other food sales revenue, accounting for 97.2%; royalties and franchise revenue of 140 million yuan (-14%), accounting for 1.3%; member revenue of 95.35 million yuan (+6%), accounting for 0.8%.
Fruit and other sales were split by channel: franchise stores worth $8.50 billion (-4%), accounting for 76.8%; self-operated stores, accounting for 0.4%; regional agents worth 1.24 billion yuan (+15%), accounting for 11.2%; direct sales of 1.03 billion yuan (+43%), accounting for 9.3%; and online channels of 260 million yuan (-6%), accounting for 2.3%. Among them, franchise stores increased 5.3%/-9.8% by number of stores/same store revenue, and the pressure on the same stores dragged down the apparent revenue.
Operating data: The expansion of stores is in line with expectations, and member penetration continues to advance. Stores: 6093 stores = 6081 franchise+12 are self-operated. The cumulative number of stores is +443 at the end of '22.
Members: The total number of members is about 83.91 million, including about 1.17 million paid members, an increase of about 13%/21% respectively from the end of '22.
Own brands: 37, 6 new since the end of '22.
Total retail sales (store+online): $14.17 billion, -3% YoY? Profitability: The gross profit level is basically the same, and the overall fee control effect is stable. The annual gross profit margin is 11.5%, -0.1pp; the net profit margin is 3.0%, +0.3pp; the sales/management/R&D expenses ratio is 4.2% (-0.2pp)/2.8% (-0.1pp)/1.3% (-0.3pp), respectively. Along with the enhancement of the company's brand power and the advancement of intelligent supply chain construction, the effect of operating scale was gradually unleashed.
Outlook: Set up three business divisions to seize fresh fruit development opportunities
Retail: Create an OMO model to help same-store recovery. As a community-based fruit store, the company will continue to strengthen its diversified reach to customers and increase the frequency of consumption. The number of WeChat fans in the store exceeded 16.2 million in '23, +26%. The Douyin channel grew significantly. The number of customers who placed orders throughout the year was +190%, and the annual retail sales volume topped the Douyin channel fruit category list.
TO B: Holding the Banguo platform and expanding the direct sales business. The company completed a further acquisition of the fresh fruit procurement platform Bangguo during the year, with a total GMV3 of 23 billion yuan. The future will seize the sinking market based on this. Furthermore, the direct sales business performed well throughout the year, with overseas/domestic direct sales revenue +62%/37% respectively.
Category: Develop your own brand and shape consumer mentality. In '23, retail sales of signboard+grade A fruit/private brand accounted for 67%/14% of the total retail sales of the store. In '24, the company will continue to strengthen the promotion of signature fruit and increase the fruit gift box market.
Profit forecasting and valuation
Baiguoyuan Group has the largest fruit retail network in the country. The upstream enters the growing side to increase bargaining power, and the downstream high-end and branding process is progressing steadily. Considering that the company will be advancing the brand renewal plan in 24, it is also expected that the focus on same-store restoration and store expansion will slow down temporarily throughout the year. We moderately lowered our 24-year profit forecast and continue to be optimistic about the company's flexible performance after the adjustment period. We expect the company's net profit to be $3.1/38/4.7 billion in 2024-2026, or -15%/+24%/+23% YoY. Under the current market value, the corresponding PE is 16/13/10 times, maintaining a “buy” rating.
Risk warning
Consumption recovery fell short of expectations; industry competition intensified; same-store performance recovery fell short of expectations; food safety and related public opinion risks, etc.