Incident: The company's 2023 revenue +1.1% YoY, net profit to mother +15.5% YoY released an annual report: achieving revenue of 10.133 billion yuan (+1.1% YoY) and net profit to mother of 561 million yuan (+15.5% YoY) in 2023; in addition, it was announced that it plans to distribute a discovery dividend of 1.24 yuan for every 10 shares. Considering factors such as the contribution of Xinwang Bank to investment income growth, we raised the 2024-2025 profit forecast and added the 2026 profit forecast. The net profit for 2024-2026 is 5.78 (+0.31) /6.00 (+0.17) /629 million yuan, corresponding EPS is 0.42 (+0.02) /0.44 (+0.01) /0.46 yuan, and the corresponding PE is 12.0/11.6/11.0 times. We believe that the company facilitates the steady operation of the main supermarket business. After holding state-owned assets, it is expected to achieve all-round resource empowerment, further stimulate growth momentum, promote continuous growth, and maintain a “buy” rating.

The performance exceeded expectations. The service business and Xinwang Bank's investment income contributed significant increases, and the company's 2023 performance exceeded expectations. Among them, the service business and Xinwang Bank's investment income contributed significant increases.

By business, the revenue growth rate of the company's food, tobacco and alcohol, household goods stores, and other businesses in 2023 was -5.5%/+9.6%/-1.7%/+16.3%, respectively. Other businesses were mainly service businesses. In terms of profitability, the company's consolidated gross margin in 2023 was 29.6%, +0.6pct year-on-year. In terms of expenses, the company's sales/management/financial expenses rates in 2023 were 22.8%/1.5%/0.6%, respectively, and +0.5pct/+0.0pct/-0.1pct, respectively. In addition, the company achieved investment income of 154 million yuan in 2023 (+46.9% over the same period last year). Mainly, Xinwang Bank increased its investment in inclusive finance loans. The asset scale exceeded 100 billion for the first time, and achieved a significant increase in operating income.

Deeply cultivate the convenience store industry to build a competitive advantage. The Sichuan Provincial State-owned Assets Administration Commission is expected to stimulate growth momentum. The company is expected to further cultivate the convenience store industry and further build competitive barriers based on the advantages of “good+service” differentiated competitive strategies, intensive store layouts, talents, and brands. In 2023, the company continued to upgrade its stores, opening/net opening 144/78 stores and refurbishing 279 old stores, bringing the total number of stores to 3,639 at the end of the reporting period. Furthermore, in 2023, the company's actual controller and its co-operator, Yonghui Supermarket, transferred some of the company's shares to Sichuan Commercial Investment Co., Ltd. After the equity change was completed, the controlling shareholder of the company changed to commercial investment, and the actual controller was changed to the Sichuan Provincial State-owned Assets Administration Commission. Sichuan Commercial Investment Group Co., Ltd. is the only modern trade circulation service industry investment platform and modern supply chain guarantee platform in the province. It is expected to achieve complementary resources and collaborative development with the company.

Risk warning: increased market competition, new store operating conditions falling short of expectations, fluctuations in investment income of Xinwang Bank, etc.