Introduction to this report:
The performance slightly exceeded expectations, and dividends exceeded expectations by nearly 100%. The economy is expected to recover quarterly. Combined with equity incentive targets, the compound profit growth rate is expected to be 12% in 2024-26. The current stock price corresponds to PE 21X in 24, and it is recommended to increase holdings.
Key points of investment:
Investment advice: Performance slightly exceeded expectations, with dividends of nearly 4%, maintaining the 2024 profit forecast EPS 0.93. Based on cost investment assumptions, the 2025 EPS was lowered to 1.04 (1.07 yuan), and the 2026 EPS was 1.16 yuan. Combined with the average valuation of comparable companies and the slowing of industry growth caused by changes in consumption habits in the new economic environment, the target price was lowered to 25.31 (34.95) yuan, corresponding to PE 27X in '24, and “increase in holdings” is recommended.
Performance review: The company announced that 1Q24 achieved revenue of 690 million yuan, -8% YoY, net profit to mother of 54 million yuan, +20.87% YoY. In 2023, we achieved revenue of 3.55 billion yuan, -1.46% year over year, and net profit of 331 million yuan to mother, +49.4% year over year. Revenue slightly exceeded expectations, and profit was in line with expectations.
The single-store boom may recover quarterly, and the 2B business may gain strength in 2H24: by the end of 2023, the number of stores nationwide was 6,205, with a net opening of 510, an increase of 9% over the previous year. According to estimates, we expect a double-digit decline in the number of units in the 1Q23 store opening growth rate. We expect revenue growth to recover quarterly from 2Q24 (base high to low). Combined with equity incentive targets, the main business sector expects revenue growth of more than 10%. The 2B business may gain strength in 2H24, contributing significantly to the annual revenue growth rate.
Maintaining a cost advantage in 2024, nearly 100% of dividends exceeded expectations: thanks to declining costs, gross margin in 2023 was +6.48pct to 22.46% year over year, and 1Q24 gross margin improved +2.2pct to 20.89%.
The 1Q24 sales expense ratio was +0.68pct to 5.22% year over year, and the management expense ratio was -0.08pct to 6.38% year over year. We expect the comprehensive tonnage cost to decline year-on-year in 2024, and the gross margin of the main business may be further restored in 2024. The company announced that the 2023 dividend exceeded expectations by nearly 100%. According to estimates, we expect dividend rates of 4.1% or 4.7% in 2023 and 24.
Risk warning: Increased competition and changes in the operating environment.