Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 1,210 million yuan, an increase of 23.50% over the previous year; achieved net profit of 90 million yuan, an increase of 18.36% over the previous year; and realized net profit of 85 million yuan without return to mother, an increase of 33.50% over the previous year. According to calculations, 2023Q4 achieved operating income of 269 million yuan, an increase of 42.03% over the previous year; realized net profit to mother of -0.16 million yuan, realized net profit to mother of -0.25 million yuan in the same period of the previous year; realized net profit deducted from non-return to mother of -08 million yuan, and realized net profit of non-return to mother of -33 million yuan in the same period last year.
High growth continued in 23Q4, slightly exceeding the incentive target throughout the year. 23Q4 revenue increased 42.03% year over year, and business and drinking demand continued to recover in the fourth quarter. Looking at the whole year, the company's Qingli Liquor revenue increased 29.5% year on year, volume and price increased sharply, and sales/ton price increased 21.5%/6.6% year on year, respectively. Among them, high-priced products grew faster than low-price products. The revenue of products over 100 yuan increased 46.0% year on year, products under 100 yuan increased 14.3% year on year, and the revenue share of products over 100 yuan increased 6.6 pct to 53.1% year on year. Looking at the subregions, revenue within and outside the province increased by 27.3%/20.6% year-on-year respectively in '23. The company's nationalization process used Jin, Shan, and Yu as strategic core markets, and actively laid out cities such as Wuxi, Fuzhou, Nanning, and Zhangjiakou to do a good job of arranging for nationalization. Fourth-quarter contract liabilities were $81 million, an increase of $23 million over the previous year.
In '23, the company's comprehensive gross margin increased 1.0 pct year on year to 63.0%, and the gross margin of Qingli Liquor decreased by 0.5 pct year on year. The increase in wine gross margin and the decrease in the share of other businesses with low gross margin led to an increase in overall gross margin. The sales expenses rate decreased by 1.0 pct year on year in '23. Among them, promotion fees/employee remuneration increased by 33.6%/4.4% year on year, respectively. In '23, product promotion activities such as the Qingli Club, the Four Seasons Wine Private Event, and the entry of famous wine into famous enterprises further increased consumer stickiness. The management fee rate decreased by 2.0pct to 12.4% year on year in '23. The amount of management expenses was basically stable, and the increase in revenue led to a decrease in the management fee rate. The financial expense ratio increased by 1.3 pct year-on-year in '23, mainly due to a decrease in exchange earnings. Under the combined impact, the annual net profit margin decreased by 0.28 pct to 7.4% year on year.
Investment advice: We believe that the company's improvement momentum was good in 23, and the core products are expected to grow steadily in 24. The company's revenue is expected to be 14.4/16.8/19.01 billion yuan in 24-26, respectively, with a year-on-year growth rate of 18.6%/16.9%/14.0%. Net profit attributable to mother is estimated to be 1.2/2.0/260 million yuan, with year-on-year growth rates of 37.2%/59.2%/30.8%, maintaining the “increase in holdings” rating.
Risk warning: Product structure upgrades fall short of expected risks, competition heightens risks, and expansion outside the province falls short of expected risks