Event: Helens announces 2023 results on March 28. Revenue was 1.21 billion yuan, down 22% year on year; gross profit margin was 70.2%, up 6.3 pct year on year; adjusted net profit was 280 million yuan, adjusted net interest rate of 23.2%. Both revenue and profit are in line with the profit guidelines. The company will pay a final dividend of 0.3153 yuan/share, totaling about 400 million yuan.
Comment: The share of alcoholic beverages as beverages continues to rise, and 2024 will be the year of production. Revenue in 2023 was $1.21 billion, down 22% year over year. (1) By product: The revenue of direct-run taverns was 1.1 billion yuan, down 29% year on year. Of these, revenue from own products accounted for 78.3%, up 0.9 pct year on year. Alcoholic beverages accounted for 58.1% of our own products, an increase of 9.5 pct over the previous year. The company defines 2024 as the product year, and plans to strengthen the barriers of differentiation through the promotion of new products on the basis of continuous iteration to increase gross profit. (2) Channel division: Franchise cooperation revenue accounted for 5.9%, an increase of 5.2 pct over the previous year; revenue from sales of goods to partner stores accounted for 2.8%. (3) Daily sales of single stores: Daily sales of direct-run and franchised cooperative pubs were 0.73 million yuan, an increase of 4% over the previous year; among them, the daily sales of first-tier, second-tier, and third-tier cities were 0.75/0.71/0.74 million yuan each, with year-on-year changes of -1%/8%/1%. Hi Beer Partner's tavern sells 0.71 million yuan per day, of which the daily sales of first-tier, second-tier, third-tier and lower city pubs are 0.94/0.77/0.69 million yuan each. (4) Same store: 333 same-store restaurants (taverns operating for at least 200 days during the year), with average daily sales of 0.93 million yuan, a year-on-year decrease of 8.8%.
Continue to promote platform-based transformation. The company opened 157 new pubs and closed 445 in 2023, bringing the total number of pubs to 479 at the end of the period. (1) Branch level: In addition to the 3 overseas locations, there were 38/186/252 rooms in first-tier, second-tier, third-tier cities and below, a decrease of 42/186/62 compared to the previous year. As of March 19, the total number of pubs was 503, a net increase of 24 over the end of 23, with most of them in third-tier cities. (2) Sub-model: There are 255/92/132 direct-operated/franchised/Hi-Beer partner pubs, compared with the changes of -398/-22/132 at the end of '22, and 236/84/183 as of March 19. The number of direct-managed and franchised pubs declined further.
The Hi Beer partner model will enter a phase of rapid expansion. (1) Small area+high floor efficiency: Hi Beer Partner's tavern has an investment of about 1 million yuan, and the threshold is lower than the previous store model; the pub area was halved to about 200 square meters, and the daily floor efficiency was 34 yuan per square meter in 2023, exceeding 19/20 yuan per square meter of direct-managed/franchised cooperative pubs. (2) Single store model:
Hi Beer Partner Tavern has daily sales of about 70,000 yuan, a capital guarantee of about 30,000 yuan, a gross profit margin of 65%, and a payback period of about 18 months. (3) Expansion: The company's guidelines initially anticipate opening 400 new taverns in '24.
The cost reduction effect was obvious, and the profit structure improved markedly. (1) Gross profit margin: 6.3pct to 70.2% year over year, gross margin of own/third party alcohol was 75.7%/54.8%, respectively, up 0.1/4.7 pct year on year. (2) Expense ratio: After deducting payment of shares, the labor cost rate was 24.7%, a year-on-year decrease of 7.4pct; the discounted fee ratio was 16.5%, a year-on-year decrease of 16.6pct. (3) Profit margin: adjusted net profit of 280 million yuan, adjusted net interest rate of 23.2%. The company declared a final dividend of 0.3153 yuan/share, totaling approximately 400 million yuan.
Profit forecast and valuation: Based on the company's asset-light transformation strategy, we lowered the company's 24-25 revenue by 34%/20% each to 10.5/1.49 billion yuan, introduced 26-year revenue of 1.95 billion yuan, with year-on-year changes of -13%/42%/31%; lowered 24-25 adjusted net profit by 55%/58% each to 21/250 million yuan each, introduced 26-year adjusted net profit of 330 million yuan, and adjusted net interest rates of 19.7%/16.5%/16.9% each. Referring to the valuation level of comparable companies, calculate a reasonable market value range of HK$46-5.7 billion and a reasonable value range of HK$3.6-4.5 per share (converted to HK$1 = RMB 0.9) based on 20-25 times PE in 24 years; maintain a “superior to market” rating.
Risk warning: The economy is declining, industry competition is intensifying, and the expansion of pubs falls short of expectations.