Incident: The company released its 2023 performance report, achieving revenue of 14.815 billion yuan, +5.53% year-on-year; net profit to mother of 1,337 billion yuan, +5.78% year-on-year.
Comment:
Tonnage prices continued to rise throughout the year, and international brands performed well. 2023Q4 achieved revenue of 1,786 billion yuan, -3.8% YoY. In terms of sales volume, 2023Q4 sales reached 350,000 kiloliters, +4.7% year-on-year. We think it is mainly due to the recovery of consumption scenarios in the base market. Judging from the tonnage price, the revenue for 2023Q4 thousand liters was 5,165 yuan, -8.1% year on year. We think the main reason is that some of the company's markets were affected by the external environment during the same period, and investment decreased. Corresponding to the revenue of 1,000 litres of wine +8.4% over the same period, to 5,622 yuan, the base figure was higher. In terms of product structure, by brand, the revenue of international brands in 2023 was +8.3% to 5.278 billion yuan. The growth rate was relatively fast, accounting for 36.5%, up 0.96pct year on year; domestic brand revenue was +3.9% year-on-year to 9.164 billion yuan, accounting for 63.5%.
In terms of price, under the new caliber, revenue from premium alcohol (8 yuan or more) in 2023 was +5.2% to 8.855 billion yuan, revenue from mainstream alcohol (4-8 yuan) was +5.6% to 5.297 billion yuan, and revenue from economic alcohol (4 yuan or less) was +10.1% to 290 million yuan.
Due to the slowing growth rate of tonnage prices and rising costs, gross margin for the whole year was slightly pressured. 2023Q4 lost 7.49 million yuan. On the one hand, gross margin was 6.79 pct year on year, and on the other hand, the 2023Q4 sales expense ratio was +4.88 pct year on year. Looking at the full-year situation, the company achieved net profit of 1,337 billion yuan in 2023, +5.8% year-on-year; net profit margin to mother was 9.0%, which was the same as the previous year. On the one hand, due to the weak increase in the company's tonnes of wine revenue, the cost of 1,000 litres of wine was +3.3% year-on-year, and the gross margin was -1.3 pct year over year; on the other hand, as the external environment improved, the company increased its investment, and the sales expense ratio was +0.53 pct to 17.1% year over year.
Profit prediction and investment rating: The company's core competitiveness lies in the 6+6 brand matrix. Our understanding of the beer business places more emphasis on product innovation. Therefore, we have long been optimistic about Chongqing Brewery's refining the tone of its brands, and the accumulation of brand assets is relatively unreplicable. Currently, the company is actively responding to macroeconomic challenges, continuously optimizing the dealer system and increasing investment. Looking ahead to 2024, we believe that Wusu outside the border is expected to gradually recover, and mainstream products such as Leburg, Chongqing, and Dali are expected to continue to grow well in dominant markets. Furthermore, from a dividend perspective, the company's dividend rate from 2021 to 2023 has basically remained above 80%, with a good return on capital. We expect Chongqing Beer's 2024-2026 EPS to be 3.02 yuan, 3.29 yuan, and 3.49 yuan, respectively, corresponding to the closing price on March 29, 2024 (64.47 yuan/share) price-earnings ratio of 21, 20, and 18 times, maintaining a “buy” rating.
Risk factors: Product structure upgrades falling short of expectations, fluctuations in raw material prices, etc.