The company released its 2023 annual report. In 2023, we achieved revenue of 5.539 billion yuan, an increase of 2.97% over the previous year; net profit to mother was 216 million yuan (previous year - RMB 11 million), and net profit not attributable to mother was reversed by 67.63 million yuan (previous year - 44.97 million yuan). The diluted EPS was 0.42 yuan, the return on net assets was 8.7%, and the net operating cash flow was 552 million yuan, a year-on-year decrease of 51.35%.
Brief review and investment advice.
1. Revenue of 5.539 billion yuan increased by 2.97% in 2023, with a year-on-year increase of 12.38% in 4Q23.
(A) By business sector, department store revenue decreased by 0.99% year on year, with sales revenue of supermarkets and shopping centers increasing by 4% and 10.19% respectively; overall gross margin decreased by 2.53 pcts, and gross margins of department stores and shopping centers increased by 1.42 pcts and 11.74 pcts, respectively. Real estate revenue fell by 88.94%, mainly due to the decline in the remaining commercial housing revenue associated with the Qianhao Project in Qingdao.
By region (B), revenue in Shandong Province and Hebei Province increased by 1.76% and 12.38%, respectively, and gross margin increased by 0.52 pct and 3.80 pct respectively. At the same time, the company entered Heilongjiang Province in '23.
2. Deeply cultivate the Shandong market, taking into account the expansion layout of surrounding areas outside the province. In 2023, 7 new stores were opened and 4 stores were closed. By the end of 2023, the company had a total of 119 stores (23 in Linqu and Huaxing, Weifang), spread across 11 cities in Shandong Province, Hebei Province and Heilongjiang Province, with a construction area of 3,0371 million square meters. In the first quarter of '24, the company opened a new store in Heilongjiang.
3. The gross margin increased by 1.03 pct in 2023, and the cost ratio decreased by 0.65 pct for the period. Overall gross margin increased 1.03 pct year on year to 41.48% year on year, and 4Q gross margin increased 2.70 pct year on year. The annual sales expense ratio increased by 0.16 pct, the management expense ratio decreased by 0.28 pct, and the financial expense ratio decreased by 0.57 pct.
4. Net profit of RMB 216 million to mother in 2023 significantly reversed losses, mainly due to the listing and transfer of assets related to the subsidiary Dezhou Mall. Dezhou Mall, a subsidiary of the company, transferred real estate, accessories, and related equipment assets held by it in the Ginza Building located at 588 Jiefangzhong Avenue, Dezhou, affecting the company's net profit of 93.63 million yuan. The company reversed the loss by withholding net profit of 67.63 million yuan in 2023. 2023 credit impairment losses - 2.39 million yuan, asset disposal income 120 million yuan, other income 6.67 million yuan, effective tax rate of 34.84%.
5. Focus on optimizing the business layout to accelerate efficiency improvement. ① The supermarket replaced nearly 30,000 products in 2023 to achieve dynamic adjustment of the product pool; the average procurement cost for key fresh food categories decreased by more than 5%. ② Baipou strengthened strategic brand control and first store introduction, introduced a number of first stores in Shandong and the first stores in the city. The brand is becoming younger and more personalized. ③ With omni-channel marketing, online sales increased 62.53% year over year.
Update profit forecasts and valuations. The estimated revenue for 2024-2026 is 5.67 billion yuan, 5.78 billion yuan, 5.89 billion yuan, and net profit to mother of 76 million yuan, 89 million yuan, and 98 million yuan. Considering that the company is a leading retail company in Shandong, there is room for integration and efficiency improvement in multiple business formats. It is given 0.5-0.6 times PS in 2024, corresponding to a reasonable market value range of 2.8 billion yuan to 3.4 billion yuan, and a reasonable value range of 5.45-6.54 yuan, maintaining a “superior to the market” rating.
Risk warning: Regional competition intensifies, e-commerce diversion, store cultivation falls short of expectations.