Incident: Jia Jiayue released its 2023 earnings report and 2024Q1 quarterly report. In 2023, the company achieved revenue of 17.76 billion yuan/ -2.31%, and net profit of 136 million yuan/ +127.04% to mother. 24Q1 achieved revenue of 5.189 billion yuan/ +5.73%, and net profit of 147 million yuan/ +7.10% to mother.
Stores: The company continues to innovate its business format and launch a discount retail format. In 2023, the company launched the snack chain brands “Yueji Snacks” and “Haohuixing Discount Store” to expand the market through a combination of self-operation and franchise, further enhancing the company's advantages of regional concentration and multi-format collaboration. As of 24Q1, the company had 999 direct-run stores and 66 franchise stores, including 67 snack stores and 8 Haohuixing discount stores. In 2023 and 24Q1, driven by the discount business, the number of the company's stores began to pick up in '23.
Supply chain: Strengthen logistics systems and commodity strength, and continuously improve supply chain capabilities. The Huaibei and Shanghe Logistics Parks have continued to strengthen infrastructure construction. Various logistics functions have been continuously improved, distribution efficiency and satisfaction rates have been continuously improved, and the results of helping stores to remove inventory are obvious. Strengthen direct harvesting and source development capabilities at fresh food bases. In 2023, the proportion of private brands and customized products reached 13.5% (13.22% in '22) omni-channel operation: online and offline integration, store-to-home business collaboration, and online sales increased 23.9%, driving 3.06 million offline customers. The in-store conversion rate reached 35%, and omni-channel operation capabilities continued to increase, creating a better experience for consumers. At the end of '23, supermarket online business sales accounted for 5.98%.
Gross margin and expenses: The gross margin in 2023 was 23.88% /+0.63pcts, and the sales/management/R&D/finance expense ratios were 18.85%/2.12%/0.07%/1.36%, respectively, +0.19/+0.08/+0.07/-0.20pcts.
Dividends: Dividend of 0.19 yuan per share, dividend payment rate of 88%.
Profit forecasting and valuation: The company is a leading supermarket in Shandong. It uses an intensive layout in multiple business formats to achieve scale effects within the region, and achieves efficient operation with an intelligent and efficient logistics distribution system and omni-channel operation capabilities. The company's early store restructuring began to bear fruit. In '24, with the expansion of the company's discount retail and mass snack business, the stores entered a period of growth, and it is expected to achieve steady growth in performance. The comprehensive forecast is that in 2024-2025, the company's net profit to mother will be 2.41/320 million yuan, corresponding to the current 27x/20xPE, maintaining the “recommended” rating.
Risk warning: store expansion falls short of expectations, consumption recovery falls short of expectations, new business format expansion falls short of expectations