Incident: The company released its annual report. In 2023, the company achieved operating income of 14.82 billion yuan, +5.5% year-on-year; net profit to mother was 1.34 billion yuan, +5.8% year-on-year.
Q4 performance weakened: 23Q4 revenue of 1.79 billion yuan, -3.8% year-on-year; net profit to mother - 750 million yuan, a positive value last year. Q4 Performance fluctuations are similar to industry leaders. We think it reflects weak demand in the industry, but the importance is low due to the low season for beer consumption.
The growth rate of international brands increased slightly, and the growth rate of local brands was still low: in 2023, the company sold 3 million kiloliters of beer, +4.9% over the same period last year. Tonnage price +0.5% YoY. Compared with the beer industry's sales volume of +0.3% year on year in 2023, the company is still a growing company. Among them, international brands showed an upward trend in growth. Revenue in 2023 was +8.3% YoY, +0.4pct compared to last year, accounting for 37% of revenue; of these, sales volume +7.9% YoY and tonnage price +0.3% YoY. Through actions such as iterating products, upgrading packaging, strengthening scene relationships, and omni-channel expansion, high-end brands such as international brands such as Leburg, Carlsberg, and 1664 have grown relatively well. The revenue growth rate of local brands is still low, +3.9% year over year, but sales growth rate of +3.8% year over year was 2.7 pcts faster than last year. Local brands are still in a period of adjustment and recovery. The highlight is that the growth rate of regional brands has accelerated.
Stable product structure: Looking at the grade level, 8 yuan+premium/4-8 yuan mainstream/4 yuan - economy class revenue was +5.2%/+10.1%, respectively, and 4 yuan - grew rapidly but only accounted for 2% of the revenue scale. The overall category structure is still stable, with the average price increase slightly in the upper grade and a slight drop in the mainstream price segment. Overall, due to the effects of the adjustments in Usu, there is a slight difference between the changing trends in product structure and leading companies.
Regional performance is related to major city plans and economic environment: the company's revenue in the northwest/central/southern regions was +1.1%/+3.0%/+13.7%, respectively, and the growth rate in the southern region was good, thanks to major city plans and channel expansion; at the same time, the company's Foshan winery is expected to be officially put into operation in 2024, which is expected to solve the problem of insufficient production capacity in South China and further reduce transportation costs. The central region is affected by the external environment, and the western region is stable.
Profitability is stable. In 2023, the company's net profit margin was 9%, the same as the previous year. Among them, gross margin was -1.3 pct year over year. Due to the high price of raw barley, it is expected to improve in 2024, and the cost of packaging materials is also declining. The sales expense ratio was +0.5pct year on year, due to the return to normal investment after normalization, in line with industry trends; the management expense ratio was -0.5pct year over year, continuing to promote the optimization of management and operation costs.
Investment advice: The big single product in 2023 is still being adjusted and recovered, but the company as a whole is still growing compared to the industry, and 2024 is also expected to benefit from lower raw material costs. We adjusted the 2024-25 profit forecast based on the 2023 performance figures, and added the 2026 profit forecast. We expect the 2024-2026 net profit of 15/16.7/18.01 billion yuan, and the 2024/4/3 closing price of 65.89 yuan, the P/E corresponding to the 2024/4/3 closing price is 21/19/18 times, respectively, and adjusted to a “careful recommendation” rating. With an international and local multi-brand portfolio, we remain focused on the company's potential for future sales growth.
Risk warning: the risk of declining spending power, the risk that sales recovery in Usu will fall short of expectations.