Revenue growth was good in 2023, profit growth was steady, and the dividend rate increased to 50%. In 2023, Guangzhou restaurants achieved operating income of 4.901 billion yuan/ +19.18%, total profit of 717 million yuan/ +11.39%, net profit of 550 million yuan/ +5.78%, after deducting non-net profit of about 506 million yuan/ +6.62%. The overall performance was stable. Among them, total revenue and profit completed the company's financial budget report at the beginning of the year (4901/683 million yuan), and net profit attributable to mother and deducted slightly exceeded the previous performance report (542/490 million yuan). The company plans to pay 4.8 yuan for every 10 shares in 2023, with a dividend rate of about 50%, which is higher than the previous dividend rate of 30-40% +, and the dividend rate is 2.6%.

The basic market for mooncakes continued to grow steadily. At a high base, the growth rate of quick-frozen was affected by pressure from channels and the consumer environment, and the low food and beverage base recovered and rebounded. In 2023, the company's food business was 3,534 billion yuan/ +8.63%, and gross margin was -2.19pct year-on-year. Among them, the mooncake business revenue was 1,669 billion yuan/ +9.88%, growing steadily, but the gross margin was -1.69 pct year over year, and the overall consumption environment was still affected. The revenue from the frozen business was 10.61 yuan/ +0.33%, and the growth rate slowed markedly. Among them, there was a relatively low base impact, while the consumption environment was poor and traditional supermarket channels were under relative pressure; the quick-frozen gross margin was 5.78 pct year-on-year, and the company increased promotions due to new market expansion and increased competition. Other business revenue was 804 million yuan/ +18.78%, mainly including products such as cured meats, prepared dishes, and cakes. The gross margin was +1.72 pct, and the performance was relatively good. The revenue from the catering business was 1,263 billion yuan/ +65.66%, the same store's restorative rebound + the opening of new stores, and the gross margin was +18.03 pct year-on-year.

Industry demand and the competitive environment have not improved significantly. The company continues to expand markets outside the province to seek its own breakthroughs, and the 2024 budget target is stable. Since this year, the recovery in food and beverage consumption and frozen consumption is still relatively gradual. At the same time, traditional sales channels and competitive pressure in the industry have yet to reach an inflection point. Under pressure from the general environment, the company's 2024 budget target is relatively stable (total revenue and profit increased by 9.6% and 1,8%, respectively). Based on this, the company also continues to seek its own breakthroughs, focusing on the East China market. In 2023, the company's revenue within and outside the province was +18.72%/+22.04%, of which the food business revenue in and outside the province was +7.45%/+12.10%; in 2023, the company added a total of 14 restaurants, including 2 Guangzhou restaurants in Shanghai. The “Catering Tree Brand” is expected to lay the foundation for the expansion of the company's food business outside the province, especially in East China. Furthermore, the first phase of the company's stock option incentive plan has already been completed. Based on the investor exchange log, the future company will make plans in advance, find suitable opportunities in accordance with relevant policies, and explore solutions that are suitable for the company and can actually produce incentive effects.

Risk warning: Consumption recovery falls short of expectations, competition intensifies, and the pace of offsite expansion falls short of expectations.

Investment advice: Considering changes in the external environment since the second half of last year, there is some pressure on the company's food business growth and gross margin. We lowered the 2024-2026 EPS to 1.08/1.23/1.38 yuan (previously, the 24-25 EPS forecast for the first half of 2023 was 1.54/1.81 yuan, an additional 26 years), corresponding to a valuation of 17/15/13x. The company's basic mooncake market is growing steadily, and the restaurant offsite brand strategy continues to advance, but the pace of growth and gross profit performance of the quick-frozen business still need to be tracked. Subsequent improvements in the company's incentives are worth looking forward to under the strengthening of state-owned enterprise reforms, but there has been no clear improvement in the short-term business environment, and the company's rating has been lowered to “increase holdings.”