2023 results are in line with market expectations
The company announced 2023 results: 2023 revenue/sales/ASP/ton cost +7.7/+3.0/ +2.6% year over year; net profit to mother +83.0/ +84.2% year over year, respectively; gross margin/sales expenses ratio/management expenses rate/net profit margin attributable to mother/net profit margin without return to mother +0.2/-1.3/+0.7/+1.9/+1.5ppt. The 2023 results are in line with market expectations.
Development trends
U8 continues to grow rapidly, leading to a continuous increase in the share of high-end products. In 2023, the sales volume of the company's U8 products increased by 36% + to more than 500,000 tons, which led to the improvement of the company's product structure. Revenue of medium- and high-end products increased by +13.3%/-2.3% year-on-year, of which the middle and high-end products accounted for 3.4ppt to 66.3%. In addition to the revenue contributions of Liquan and Huiquan, the company's revenue also increased 8.8% to 9.53 billion yuan in 2023. Single 4Q23 revenue/sales/ASP/ton cost was -4.4/-2.4/-2.1/ +9.0% year over year. The negative year-on-year increase in 4Q23 revenue/sales was mainly due to the high base for the same period and weak current consumer demand.
Structural upgrades hedge against upward pressure on raw material costs and continue to improve efficiency and reduce losses. In 2023, the company's gross margin was +0.2ppt to 37.6% year over year. Among them, medium- to high-end gross margin was -1.89/+3.04ppt year over year. Fluctuations in mid-to-high-end gross margin were mainly due to rising costs, and ordinary product upgrades and replacements led to an increase in gross margin. Sales expenses fell 3.6% year-on-year, leading to a year-on-year sales expense ratio of -1.3ppt, mainly due to the high cost base for the 2022 Winter Olympics title expenses; due to internal reforms, retirement benefits increased from 53 million yuan in 2022 to 138 million yuan in 2023, resulting in a management expense ratio of +0.7ppt year-on-year, of which the impact of dismissal benefits was 0.6ppt.
In 2023, the net interest rate of Liquan and Huiquan companies increased by 2.9/1.4ppt to 17.0%/8.0%, and net profit from companies other than Liquan and Huiquan changed sharply from -76 million yuan in 2022 to profit of 96 million yuan.
2024 outlook: The budget target is to achieve 7% revenue growth, U8 continues to have a rich product portfolio and a sharp rise in volume and price, optimize reform efficiency and continue to improve profitability. U8 is positioned at a price of 8-10 yuan to enjoy upgrade dividends. Relying on the rapid expansion of the base market, we believe that the development potential will continue to penetrate the country, thereby achieving the goal of 90-1 million tons by 2025. Furthermore, the company followed the trend to build products such as V10, U8plus, and fresh beer 2022, forming a healthy high-end layout. In terms of management, the company strengthens its headquarters functions, optimizes the supply chain, digitalization, etc., and is expected to achieve a steady increase in profitability as labor efficiency increases and cost rates are reduced. Furthermore, with the price of raw materials such as barley falling, we expect the company's profitability to improve significantly in 2024.
Profit forecasting and valuation
Considering reforms to improve efficiency, lower costs, and improved profitability, we raised our 2024 net profit of 13.6% to the mother, introduced net profit of 1,261 billion yuan in 2025. The current stock price was traded at 28.3/21.4 times P/E in 2024/25. Considering the impact of sector valuation fluctuations, we kept our target stock price unchanged at 15.0 yuan/share, corresponding to 44.3/33.5 times P/E in 2024/25. There is 57% room for improvement compared to the current stock price, maintaining an outperforming industry rating.
risks
Market competition, fluctuations in raw material prices, changes in preferential tax policies, food safety and other risks.