Event: The company announced its 2023 results. In 2023, the company achieved revenue of 1,812 billion yuan, an increase of 28.10% over the previous year; achieved net profit of 59.54 million yuan, an increase of 42.86% over the previous year; and achieved deducted non-net profit of 31.32 million yuan, an increase of 86.07% over the previous year.
Focus on collaborative industrial operation, channel branding reform for sugar and wine business, and improving refined operation capabilities in the hotel business. In 2023, revenue from the hotel/ commercial/ housing leasing/ property management business increased by 41.56%/28.98%/-3.34%/15.86%, respectively. In 2023, Nanjing Jinling Hotel's revenue increased 30% year-on-year, and single-room revenue, catering revenue, and wedding revenue reached record highs. The alcohol trade sector strengthened the cultivation of new brands and established specialty stores such as Maotai and the Xijiu Brand Department. Revenue exceeded 1 billion yuan, an increase of 28% over the previous year.
Fee control was strong, and profit margins rebounded year on year. In 2023, the company's comprehensive gross margin was 27.8%, down 2.5 pcts year on year. Mainly, some liquor manufacturers promoted channel-side reforms to adjust price differences among channel partners. The gross margin of the company's commercial trade sector fell 6.64 pcts to 10.61% in 2023. The hotel business recovered along with operations, and gross margin was +10.65pct to 43.82% year-on-year, a significant improvement. We believe that with the reform and stabilization of the sugar and alcohol business channel and the increase in the revenue share of the high-margin hotel business segment, the company's gross margin level is expected to be further optimized. On the cost side, the company's expense rate decreased by 3.6 pct during the 2023 period, thanks to the year-on-year decline in marketing and promotion fees and commissions at Sugarcane, which led to an improvement in sales expenses. The company's net profit margin in 2023 was 3.28%, +0.34pct year-on-year.
Personnel adjustments and promotion of market-based incentive system reforms have entered a new stage in the company's development. In 2023, the company continued to push forward three system reforms, implement competitive recruitment and final position adjustment systems for management positions, and stimulate the vitality of talent development. At the end of 2023, the board of directors elected Bi Jinbiao as the chairman of the 7th board of directors of the company, which is expected to strengthen capitalized operation capabilities and promote the integration of high-quality hotel assets.
Investment advice: The company is a national hotel brand with outstanding operational advantages in the middle and high-end full-service hotel sector. It is driven by two-wheel drive with brand operation and capital expansion. The hotel chain continues to expand, compounded by rapid growth in the commodity trade sector, and growth potential is visible in the context of deepening national reform. We expect the company's net profit to be 0.889/1.13/130 million yuan in 2024-2026, respectively, and the corresponding PE is 34.01/26.71/23.17X, maintaining a “buy” rating.
Risk warning: competition in the industry intensifies; the prepared food business falls short of expectations; store expansion falls short of expectations