Maintain an increase in holdings. In 2023, revenue was 11.39 billion yuan/ +0.7%, and adjusted net profit of 342 million yuan/ +1.1% was slightly lower than previously anticipated. Considering that advancing the three major campaigns in the next 2 years will have a certain impact on the cost side, the adjusted net profit forecast for 2024-25 was lowered to -2.8/ 10.1%, and adjusted net profit of 2026 million yuan is predicted to grow by 14.7%; 22 times the valuation was applied, and the target price was lowered to HK$4.6 billion to maintain the increase in wealth.
The number of stores and paid members has been growing steadily, and signboards and A-grade fruits have performed well. 1) As of the end of 2023, there were 6093 stores, compared with +443 at the end of the previous year (note: same below), including 6081 homes/+450 franchised stores (4818 homes/+241 self-managed stores), 12 or -7 directly-managed stores, with a network of stores spread across more than 170 cities in over 22 provinces/municipalities in China; 2) By the end of 2023, the number of members exceeded 83.9 million/ +13%, of which 1.17 million paid members/ +21%; 3) Own products by the end of 2023 Compared with +6 at the end of the previous year, sales accounted for 14%. Among them, sales of fruit corn increased by 3076% and gold Venus apples increased by 515%. The contribution of own products to revenue is expected to continue to increase; 4) The share of sales of signature grade and A grade fruit reached 66.5%.
2B and OMO continue to gain strength, and cost optimization highlights lean growth. 1) According to the revenue structure, franchise store revenue accounted for 76.8% /yoy-3.8pct (same below), regional agents accounted for 11.2% /+1.5pct, and direct sales accounted for 9.3% /+2.7pct; 2) Store revenue decreased by 4% and single store revenue of 1.8 million yuan/ -9.8%, mainly due to factors such as increased residents' travel and changes in the consumption environment; 3) Direct sales revenue increased by about 42.5%, with growth of 62% overseas and 37.2% growth for domestic customers; 4) OMO continued to gain strength through shiver Consumer orders increased 190%, with 16.2 million WeChat followers/+25.6%; 5) gross profit margin 11.5% /-0.1pct, net profit margin 2.98% /+0.27pct, adjusted net interest rate 3% /+0.01pct; 6) sales expense ratio 4.23% /-0.18pct, management expense ratio 2.75% /-0.09pct, R&D expense ratio 1.28% /+0.1pct, financial expense ratio 0.14% /-0.15pct.
The organizational structure was optimized, and the three major battles promoted the construction of a long slope and heavy snow. 1) Optimize the organizational structure of business operations, namely the retail business group, 2B business group, and category business group, which will focus more on core business, improve efficiency, and explore new revenue sources; 2) Complete the further equity acquisition of Shenzhen Bangguo, which currently holds 51% of the shares. In 2023, Bangguo's GMV reached 3.07 billion yuan. The future hopes to improve supply chain efficiency and expand the market share of the 2B sector; 3) Released the 10-year Golden Year Strategy, which is to renew the strategy, comprehensively promote the global signature fruit and boost the gift market. The 2024 Spring Festival gift box will increase + 40% year over year; 4) Strengthen intelligent warehousing and supply chain management, and consolidate the construction of underlying infrastructure.
Risk warning: franchise management risks, store expansion falling short of expectations, food safety, etc.