incident. The company released its 2023 annual report and achieved full-year revenue of 1.78 billion yuan, +10.1% year over year; net profit to mother of 40 million yuan, +96.5% year over year; net profit after deducting non-return to mother 190 million yuan, +5.2% year over year. 23Q4 achieved revenue of 620 million yuan, +25.1% year over year; net profit attributable to mother/net profit of non-return to mother was 268.8%/+0.4%, respectively. The high increase in net profit to mother was mainly due to revenue from disposal of long-term assets in the area where Shen Yonghe Distillery Phase I was demolished. It is proposed to pay a dividend of 1.4 yuan (tax included) for every 10 shares, with a dividend rate of about 32.2%.
High-end leadership, product structure upgrade and national market expansion have achieved remarkable results. The company's alcohol revenue/sales volume/ASP in 2023 was +10.5%/+11.7%/-1.1% year-on-year. In terms of grade, the revenue of mid-range high-grade alcohol/regular alcohol was +12.4%/+5.9% to 1.240.48 billion yuan, accounting for +1.2/-1.2pct, respectively, and +31.2%/+11.8% year-on-year revenue for single Q4. The annual sales volume of mid-range and high-end liquor was +7.2%/+4.9% respectively. The Chinese Brew 1959 and Blue and White Liquor series led high-end advantages and consolidated the market position. Regionally, Shanghai/Zhejiang/Jiangsu/other regions/international sales revenue was +7.5%/+6.9%/+14.7%/+2.0%, accounting for -0.6/-0.3/-0.3/+1.4/-0.2pct. The net number of dealers increased -8/+2/-7/+17/+4 to 147/638/186/910/35, and Beituo continued to deepen.
Increase investment in marketing, increase gross margin, and deduct slight fluctuations in non-net interest rates. The gross margin of the 23/23q4 company was +2.1/+4.8pct year-on-year to 37.6%/38.4%, and the annual cost per thousand liters was -4.7%. Benefiting from product structure upgrades and scale effects, gross margin increased steadily. In '23/23Q4, the company's sales expense ratio was +2.7/+5.3pct to 13.8%/16.1% year on year, and the annual employee salary/advertising fee/e-commerce platform expense ratio was +0.4/+0.7/+1.1 pct year on year. The company is actively promoting the “Over Wine, the World” promotion campaign. As a national banquet wine for the Hangzhou Asian Games, the brand's influence continues to deepen. The management fee rate was basically stable, +0.2/+0.6pct to 6.4%/5.6% year-on-year in 23Q4. Taken together, the net profit margin of the company after deducting non-return to mother in '23/23Q4 was -0.5/-2.5pct year-on-year to 10.7%/10.1%, respectively.
Leading market shares are bucking the trend, and profitability is expected to improve. Affected by the external environment, rice wine companies over 23 years old completed sales of 8.5 billion yuan (10.2 billion yuan in '22). As a high-end leader in the industry, the company actively strengthens consumer cultivation, drives the industry out of the bottom, and steadily increases its market share. Since December '23, the company has raised prices by 2%-5% for some products aged 5 years or less, and the price market is expected to be transmitted upward. At the same time, the main body of the Rice Wine Industrial Park (Phase I) has been completed, and production efficiency is expected to improve after it is put into operation, and asset depreciation is expected to increase in 24 years. The total compensation for the second phase of the demolition of Shen Yonghe Distillery was 730 million yuan. The current period has already received an advance payment of 350 million yuan. It is estimated that 24-year long-term asset disposal proceeds will still have an impact on net profit due to mother.
Investment advice and profit forecasting. We expect the company's 24-26 revenue of 19.5/21.1/2 billion yuan (previous value: 20.6/2.28 billion NA yuan) and net profit to mother of 4.6/2.7/31 billion yuan (previous value: 2.7/3.2 billion NA yuan). The 24-year BVPS forecast is 6.7 yuan. Refer to the average PB value of 3.6x of comparable companies. Considering that the company is recovering its performance and that the category value of rice wine is still seriously undervalued, Guyue Longshan was given 1.8x PB for 24 years (previous value 2.0x in 2023), and the target price was reduced by 3% to 12 yuan to maintain the “superior to the market” rating.
Risk warning: rising raw material prices, increased market competition, food safety issues