The company promoted a high-end and youthful strategy in 2023. Mid-range and high-end wines were upgraded to high-end products such as green jade and blue and white liquor. Gross margin followed the increase, but investment in advertising and e-commerce platforms increased. Looking ahead to the year 24, the company has set a target for both alcohol revenue and profit. The core direction is still the high-end path with Qingyu as the starting point. It is recommended to focus on the Qingyu growth curve. The profit side benefits in the medium to long term from the improved product structure and the optimization of the efficiency of the rice wine industrial park, but depreciation is expected to increase starting in '24, and the cost ratio has increased steadily and slightly. Considering the impact of eviction compensation, we gave 24-25 EPS predictions of 0.53 and 0.29 yuan, giving it an “increase in wealth” rating.
Incident: The company released its annual report. In 2023, it achieved revenue of 1.78 billion yuan, a year-on-year increase of 10.1%, net profit to mother of 400 million yuan, an increase of 96.5% year-on-year, and net profit after deducting 190 million yuan of non-return to mother, an increase of 5.2% over the previous year. Q4 achieved revenue of 620 million yuan, an increase of 25.1% year on year, net profit to mother of 260 million yuan, an increase of 268.9% year on year, and net profit after deducting non-return to mother 60 million yuan, an increase of 0.4% year on year. Revenue growth in the Q4 peak season exceeded expectations. Thanks to the accumulation of early marketing and investment promotion, and the year-end mobilization sprint to the annual growth target, eviction compensation increased net profit. The company pays a cash dividend of 1.40 yuan (tax included) for every 10 shares, and plans to distribute a dividend of 127 million yuan for the whole year, with a cash dividend ratio of 32.2%.
Upgrades to high-end wine contributed to growth, and the development of the national market was improved by expanding from north to west. By product, in '23, the company achieved revenue of 12.4/4.8/0.2 billion yuan, medium and high-end liquor, with a year-on-year increase of 12.4% (volume +7.2%, price +4.9%), regular alcohol increased 5.9% year on year (volume +14.5%, price -7.5%), glass products decreased 20.5% year on year, and high-end wine was upgraded internally to high-end products such as green jade and blue and white liquor.
Guyue Longshan used green jade as a high-end gripper to increase the cultivation of dealers and consumers, and actually completed sales of 30,000 boxes in 23 years, while driving sales of products such as blue and white liquor in the middle price range. Looking at the subregion, in 23, Shanghai/Zhejiang/Jiangsu/others/international regions achieved revenue of 3.5/5.0/1.7/6.6/0.4 billion yuan respectively, compared to +7.5%/+9.4%/+6.9%/+2.0%. The company relied on opening 53 tasting halls and slow pubs across the country to increase its expansion efforts outside of Jiangsu, Zhejiang and Shanghai, adding 263 dealers to fill 24 empty prefecture-level cities in the north. At the same time, Ningbo's “Famous Wine Entered Famous Enterprises” entered 54 “Famous Enterprises” in Jiangsu, Zhejiang, and Anhui. “Violent” action .
Gross margin has been rising steadily, and e-commerce platform fees have increased significantly. In '23, the company achieved a gross profit margin of 37.6%, a year-on-year increase of 2.1 pcts (Q4+4.8pcts). Benefiting from the product structure upgrade, the gross margin of medium- and high-end wine/regular wine/other businesses achieved 44.7%/21.3%/62.4%, respectively, +1.3/+3.9/-0.7 pcts year on year.
The 23-year sales expense rate was 13.8%, up 2.7 pcts (q4+5.2 pcts) over the previous year. Among them, the advertising rate/e-commerce platform rate increased by 0.7/1.1 pcts respectively, mainly due to increased investment in the company's marketing activities and the addition of new e-commerce platform companies. The 23-year management fee rate was 6.4%, up 0.1 pct from the previous year, which is basically the same as last year. The R&D expenditure rate for 23 years was 1.6%, an increase of 0.4 pct over the previous year, focusing on increasing investment in basic research on rice wine. The company achieved a deduction of 10.7% non-net interest rate in 2023, a slight decrease of 0.5 pct. Affected by Shen Yonghe's compensation payments for the eviction of the winery, long-term asset disposal revenue increased by 260 million yuan year on year, and the net interest rate increased to 22.3% in '23.
Investment advice: High-end is still the core focus. It is recommended to focus on Qingyu's growth curve and give it an “gain” rating. The company set an annual goal of increasing alcohol sales and profits by more than 12% in 2024. It continues to adhere to high-end and youthful development ideas, and uses green jade as a starting point to cultivate consumers. Whether Qingyu can successfully change consumers' perception of rice wine is the key to victory. It is recommended to focus on the growth curve of large single products. The profit side is expected to continue to be affected by demolition compensation in 24. The gross margin will continue to improve along with the product structure, but this is partly offset by the increase in the conversion and depreciation of the rice wine industrial park. The industrial park will help reduce production costs in the long term. Expense rate investment is expected to rise steadily and slightly. We gave the 24-25 EPS forecast of 0.53 and 0.29 yuan, giving it an “increase in wealth” rating.
Risk warning: New product expansion falls short of expectations, phased intensification of industry competition, peripheral market expansion falls short of expectations, etc.