Incidents:
The company released its 2023 annual report and achieved annual revenue/net profit of 339.37/4.268 billion yuan, an increase of 5.49%/15.02% over the previous year. Among them, Q4 achieved revenue of 2,958 billion yuan, a year-on-year decrease of 3.37%, and net profit to mother of 640 million yuan, an increase over the same period (22Q4 net profit to mother - 556 million yuan). The results are in line with market expectations.
Investment summary:
The development of the main brand portfolio improved the product structure, and the trend of increasing the price of 1,000 litres of alcohol continued, and sales were under pressure in the short term in the 4th quarter of '23. The annual sales volume in '23 was 8.01 million kiloliters, down 0.82% year on year. The price of a thousand litres of alcohol was 4,170 yuan/kilolitre, up 6.18% year on year. The increase in the price of 1,000 litres of alcohol throughout the year was the driving force for performance growth. The annual sales volume of the Qingdao brand and other brands was 4.56 million/3.45 million kiloliters respectively, up 2.67% from the previous year/ down 5.08%. The Qingdao brand achieved revenue of 23.263 billion yuan, and other brands achieved revenue of 10.143 billion yuan. The price of the Qingdao brand/other brands was 5101.53/2939.94 yuan/kilolitre, increasing 5.76%/3.81% respectively, further gaining competitive advantage in the middle and high-end markets. Among them, 23Q4 sales volume was 716,000 kiloliters, down 9.48% year on year, Qingdao brand sales fell 3.49%, sales of other brands fell 19.08%, and the overall price of 1,000 litres of alcohol bucked the trend and increased by 3.66%. The fourth quarter was mainly affected by poor industry demand, increased bankruptcy of small restaurants, and public opinion events. During the year, the company accelerated the “1+1+1+2+N” portfolio development of the main brand, optimized product structure upgrades, and beer products such as Qingdao Classic and Qingdao White Beer continued to grow rapidly.
Deeply cultivated in one vertical and two horizontal market strategies, the South China market in Shandong is leading the growth rate. In 23, the company's sales regions had revenue of 22.869 billion yuan, up 7.03% year on year, accounting for 68.46%. The South China region in the overseas market grew rapidly, and revenue increased 6.53% year on year to 3.622 billion yuan. The company deeply cultivates one vertical and two horizontal market strategies, consolidates and enhances the dominant position in the base market, actively explores emerging markets, promotes balanced regional development, strengthens regional network construction, and takes multiple measures to achieve continuous and steady growth in performance.
Production costs have risen, structural upgrades have absorbed cost pressure, expenses have increased during the period, and profitability has increased. The total cost of a thousand litres in '23 was 2564.37 yuan/kilolitre, up 3.3% year on year. Among them, the direct material cost was 1708.63 yuan/kilolitre, up 3.5% year on year. The cost increase was mainly due to the increase in raw materials. The gross sales margin increased by 1.81 pct year on year when the price of 1,000 litres of alcohol increased by 1.81 pct. The sales expenses ratio increased by 0.98 pct, or increased channel investment and communication with the company It is related to promoting and promoting the consumer experience. Among them, the Q4 sales expense ratio increased by 41.4% year on year by 9.54 pct, and the management fee ratio increased by 4.19 pct year on year. It is expected that the main reason is to control public opinion and increase channel investment and advertising.
Adhering to the innovation drive, speeding up the conversion of old and new kinetic energy, structural upgrades and cost reduction are expected to drive 24-year performance improvement. The company has successively launched projects such as a high-end specialty beer production base with an annual output of 1 million kiloliters, a production base of 1 million kiloliters of pure draft beer, and a 250,000 ton high-end malt raw material base, launching high-end puree and fresh products, and digitally empowering the supply chain. The company continues to promote the release of core products to drive the upgrading of the product structure and cultivate new mid-range and high-end products. There is room for decline in import tariff adjustments and prices of raw and auxiliary materials. Restaurant chains are leading recovery, and there is a bottom-up trend in demand for comfortable consumption and upgrades.
Investment advice: The company's operating income for 2024-2026 is estimated to be 358.51 billion yuan, 377.52 billion yuan, and 39.401 billion yuan, respectively, and net profit to mother of 4.926 billion yuan, 5.451 billion yuan and 6.020 billion yuan respectively. Earnings per share are 3.61 yuan, 4.00 yuan and 4.41 yuan respectively. The corresponding PE is 21.59X, 19.51X and 17.66X, respectively, maintaining a “buy” rating.
Risk warning: Product and channel cultivation falls short of expectations, fluctuating raw material prices, food safety risks, etc.