Key points of investment

Performance situation:

Net income of $1,921 million (YoY -1.7%); net profit to mother of $71 million (YoY +129.0%); net profit without return to mother of $0.48 billion (YoY +1039.4%); 23Q4 revenue of $340 million (+1.2% YoY); Net profit attributable to mother of $30 million (+43.6% YoY); net profit without return to mother of $39 million (YoY +41.3%).

Revenue side: The opening of the store is progressing smoothly, and the same store is still being repaired

1) Store opening & same store: In 23 years, the company has steadily promoted community store coverage, continued to expand the high-potential store layout, and superimposed the development of stores in scenic spots and service areas. The store opening target has reached more than 70%, and the store expansion is progressing smoothly. The number of stores reached 4,497 in '23 (net increase of 572), and the same store is still being restored.

2) By product: In 23 years, the company's fresh products/packaged products/slaughter and processing/rice products business (accounting for 74%/3%/2%/19%) achieved revenue of 14.13/0.54/0.46/ 358 million yuan, -0.9%/+5.3% year-on-year. The company's main halogen products business was under pressure. The rice products business accelerated through fine management and channel business expansion, and revenue growth corrected year-on-year.

3) Channel division: The company's direct management model/franchise model/others (accounting for 10%/66%/24%) achieved revenue of 1.92/12.62 billion yuan in 2013, a year-on-year change of +7.9%/-5.5%/+6.1%.

Profit side: Cost-side pressure relieved, gross margin improved

Profitability: ① Gross profit margin: 23/23Q4 gross margin was 29.1%/30.7% (+0.9pct/+6.4pct year over year), 23Q4 gross margin improved significantly; ② Net profit margin: 23/23Q4 net profit margin was 3.7%/-8.9%, +2.1pct/+7.1pct year over year.

Profit forecasting and valuation

We expect the company's revenue growth rate in 2023-2025 to be 19.80%/15.90%/14.30%; net profit growth rate to mother will be 103.98%/28.97%/13.47%, respectively; PE will be 33/25/22 times, respectively. Maintain an “Overweight” rating.

Risk warning

Demand recovery fell short of expectations, and new customer development fell short of expectations.