Key points of investment
Incident: The company released its 2023 annual report, achieving full year revenue of 14.21 billion yuan (yoy +7.7%), net profit to mother of 640 million yuan (yoy +83.0%), and net profit of 500 million yuan (yoy +84.2%) after deducting non-return to mother net profit (yoy +84.2%). Non-recurring profit and loss fluctuations were mainly due to increased government subsidies. 23Q4 revenue for a single quarter was 1.80 billion yuan (yoy -4.4%), net profit to mother was -310 million yuan (-320 million yuan in the same period last year), net profit after deducting non-return to mother - 370 million yuan (-360 million yuan for the same period last year). The company's performance was higher than the previous forecast center, and the loss reduction effect was remarkable.
The volume and price of the beer business increased rapidly, and U8 maintained high growth. In 2023, the company's beer business revenue increased 7.5% year on year. Among them, the tonnage price increased 2.8% to 3,322 yuan; sales volume reached 3.94 million kiloliters, up 4.6%; the large single product U8 increased by more than 36% year on year, and sales reached 530,000 kiloliters. Looking at the structure, the company's high-end product revenue increased 13.3% year on year in 2023, accounting for 66.3% of the overall revenue for beer (yoy+3.4pct), with a gross profit margin of 43.9% (yoy-1.9pct); revenue from ordinary products also increased -2.3%, with a gross profit margin of 29.0% (yoy+3.0pct). The company's sales volume for the 2023Q4 single season weakened by -2.4% year-on-year due to lower demand in the off-season fresh drink market. The tonnage price is expected to be -2%. U8 is expected to continue its good growth trend. Looking at the subregions, the company's main market revenue in North China increased 7.5% year on year in 2023, with revenue in South China/East China/Central China +6.8%/35.6%/-10.5% respectively, and the number of dealers for the whole year reached 8,534 (net increase of 261 compared to 2022).
The results of the reforms continued to be realized, and the profit performance was impressive. In 2023, the company's overall gross margin reached 37.6% (yoy+0.2pct), and the annual sales/management/R&D expenses ratio was -1.3/+0.7/-0.1pct, respectively. The company's optimization continued. The number of employees in 2023 was 21,405 (a year-on-year decrease of 2,303), termination benefits increased by 138 million yuan, and the management fee rate increased year-on-year due to an increase in related one-time expenses. According to subsidiary companies, Guilin Liquan/Fujian Huiquan's revenue increased 6.2% /flat year on year, and net interest rates increased by 2.9 pct/1.4 pct, respectively. The company's overall net profit in 2023 was 855 million yuan, of which Liquan & Huiquan had net profit of 741 million yuan. Other subsidiaries turned profits for the first time in recent years, achieving net profit of 114 million yuan. The company's overall income tax rate in 2023 was 17.7% (yoy-3.2pct), with remarkable loss reduction results. In 2023, the company's net profit margin to mother reached 4.5% (yoy+1.9pct).
Profit forecast and investment rating: Looking ahead to 2024, we expect U8 products to maintain good growth. A matrix of diverse products such as Yanjing V10, Liquan 1998, Fresh Beer 2022, and New Snow Deer will drive the company's volume and price to rise sharply. The company will further promote production, research and marketing reforms and optimize the supply chain. It is expected that the results of the reform and loss reduction will continue to be realized. We maintain the company's 2024-26 net profit forecast of 90/11.7/1.43 billion yuan (2024-26 net profit growth rate is 40%/30%/22%, corresponding net interest rate is 5.8%/7.1%/8.2%, respectively), and the latest closing price corresponding to 2024-2026 PE is 31/23/19 times. We are optimistic about the company's long-term growth. There is still plenty of room for improvement in profitability, and maintain the “buy” rating.
Risk warning: Competition in the industry has intensified, the recovery of the ready-to-drink scene falls short of expectations, the results of reforms have fallen short of expectations, food safety, and raw material costs fluctuate.