Incident: The company released its 2023 annual report. The company achieved revenue of 1,209 million yuan, a year-on-year decrease of 22.5%; realized net profit of 181 million yuan, compared to -1,601 million yuan in the same period last year; achieved adjusted net profit of 280 million yuan, compared to -241 million yuan for the same period last year.
A platform-based company with strategic transformation, Hi-Beer Partners accelerates store expansion. As of March 19, 2024, the company has opened a total of 503 pubs, covering 32 provinces and 200 cities. Among them, Hi-Beer Partner stores have signed 383 contracts and opened 188 stores, covering 136 cities, and 67 new markets. The daily sales level of direct-run taverns reached 7.3 thousand yuan/day in 2023, a significant improvement over 7.0 thousand yuan/day in 2022. The daily sales level of Hi Beer Partner stores is basically the same as that of direct-run stores. The overall performance in 2023 was 7.1,000 yuan/day. Hi Beer Partner stores have adopted a new single-store model, with lower capital guarantee points and significant improvements in operating efficiency. The average daily floor efficiency of a single store in 2023 was 34 yuan/㎡, far higher than the 19 yuan/㎡ of direct-run stores.
The same stores are under relative pressure, and gross margins have rebounded. The tavern market environment is becoming increasingly competitive. Combined with consumers, the daily sales level of a single store in the same store in 2023 was 9.3 thousand yuan/day, down 8.8% from 2022.
We believe that, driven by the company's actions to optimize its business model, increase efforts to promote new products, and enhance brand strength, the company's same-store level is expected to recover. Tavern stores resumed normal operations in 2023, and the gross margin at the store level increased from 64% to 70.1%. The gross margin of self-owned alcohol increased by 0.1 pct to 75.7% year on year; the gross margin of alcohol from third party brands increased 4.7 pct to 54.8% year over year.
Investment advice: The company actively transforms the franchise model, and its profitability and resilience to risks are expected to improve. With the subsequent restoration of consumer travel intentions and the arrival of the peak summer season, the company is expected to usher in an ideal profit release process. We expect the company to achieve net profit of 234/2.94 billion yuan in 2024-2026, corresponding to PE16.75/13.37/11.38X, respectively, and maintain the “increase in holdings” rating.
Risk warning: store expansion falls short of expectations; single-store sales fall short of expectations; recovery of optional consumption falls short of expectations