Incidents. The company released its 2023 annual report: in 2023, the company achieved total operating income of 14.815 billion yuan, net profit to mother of 1,337 billion yuan, +5.8% year-on-year, after deducting non-net profit of 1,313 billion yuan, +6.5% year-on-year. Among them, the company achieved total operating income of 1,786 billion yuan in a single quarter, -3.8% year-on-year, and net profit to mother of -07 billion yuan, which turned negative year-on-year. The results are in line with previous forecasts.
Sales growth is superior to the industry as a whole, and high-end beer is under pressure in the short term. The company's beer revenue in '23 was +5.4% year-on-year to 14.442 billion yuan, with total sales volume/average price +4.9%/+0.5% year-on-year to 299.75 kiloliters/4817.8 yuan/liter, respectively. The sales growth rate was significantly higher than the 0.3% year-on-year growth rate of national beer production in '23. In the fourth quarter of a year, the company's beer sales volume/average price were +4.8%/-9.3%, respectively. In terms of product structure, the company's annual report adjusted the classification of the product structure. High-end, mainstream, and economic products are beer with a consumer price of 8 yuan/4 yuan/8 yuan/4 yuan or less, respectively. Revenue from premium, mainstream, and economy beer was +5.2%/+5.6%/+10.1% year-on-year to 88.55/5297/290 million yuan, respectively. The sales volume of premium and mainstream beer was +4.0%/+6.0%, respectively. We believe that the volume of high-end brands such as Leborg and Chongqing is an important driver of the company's revenue growth. Looking at the subregions, the company's northwestern/central district/southern region revenue was 1.1%/+3.0%/+13.7%, respectively, and 4Q23 northwest/ central/southern revenue was +23.5%/-3.6%/-13.7%, respectively. The increase in the northwest region in the fourth quarter may be related to the low base for the same period in '22. In terms of channels, the number of dealers in the northwest region/central district/southern district of the company at the end of Q4 changed by -131/+62/+83 compared to the same period in '22, respectively. The total number of dealers in the company reached 3069, a net increase of 104 compared to the end of Q3.
Gross margin fluctuates slightly throughout the year, and the Q4 product structure affects gross profit. 1) 23 companies achieved gross profit margin of 49.2%, -1.33pct year-on-year. Looking at the structure, the profitability of high-end products has declined, with gross margins of -1.57pct/-0.88pct/+0.78pct year-on-year, respectively. In terms of cost, the cost per kilolitre in '23 was +3.2% compared to '22, and the cost pressure was reduced compared to '22 (+4.8% YoY). 2) The 4Q23 company achieved a gross profit margin of 48.8%, -6.79pct year-on-year. We think it may be related to the phased pressure of high-end technology and the phased decline in product structure caused by rapid growth in the northwest region.
Profit margins remained flat year-on-year for the whole year, and Q4 fee investment increased. 1) The company's sales/management/R&D/finance expense ratios were +0.53/-0.47/-0.61/-0.01pct, respectively. Significant optimization of management and R&D expenses led to a year-on-year cost ratio of -0.56 pct. The actual corporate income tax rate in '23 was 1.91 pct to 19.7% year over year.
Taken together, the company's net profit margin reached 9.0% in '23, which is the same as in '22. 2) Looking at the Q4 single quarter, the company's net profit to mother was -0.07 billion yuan, after deducting non-net profit of -0.13 billion yuan, all of which turned negative year-on-year. Mainly, gross margin fluctuations and sales expenses investment. In 4Q23, the company's sales expenses ratio was +4.88pct year-on-year.
Profit forecasting and investment advice. We expect the company's 2024-2026 EPS to be 3.02, 3.30, and 3.55 yuan/share, respectively. Referring to comparable company valuations, we gave the company 20-25 times PE in 2024, with a corresponding reasonable value range of 60.40-75.50 yuan, maintaining a “superior to the market” rating.
Risk warning. High-end demand is differentiated and fragmented, some price bands have restarted price wars, the scale and profits of new businesses in the early stages of diversification were poor, and raw material prices rose.