Description of the event
Yanjing Brewery achieved total operating income of 14.213 billion yuan (+7.66% year over year); net profit to mother of 645 million yuan (+83.02% year over year), after deducting non-net profit of 500 million yuan (+84.23% year over year). Looking at 2023Q4 alone, the company achieved total operating income of 1,797 million yuan (-4.41% year-on-year); net profit to mother of 311 million yuan (year-on-year loss reduction), after deducting non-net profit of 366 million yuan (year-on-year increase in loss).
Incident comments
U8 products are leading high-end growth, and the trend of structural optimization is clear. In 2023, the company's beer business achieved revenue of 13.098 billion yuan (+7.51% year over year), achieving sales volume of 3.9424 million kiloliters (+4.57% year over year), and the average price of a kilolitre increased by 2.82% to 3,322 yuan; by grade, medium and high-end products achieved sales of 8.679 billion yuan (+13.32% year over year), of which U8 products achieved sales volume of 532,400 thousand kiloliters, a year-on-year increase of 36.9%, and the gross margin of high-end products decreased by 1.89pcts year on year, while ordinary products achieved revenue of 44.20 pcts year on year 100 million yuan (-2.33%), but the gross margin of ordinary products increased by 3.04 pct year on year, and the trend of overall structural optimization is clear. Looking at 2023 revenue by region: North China was 7.429 billion yuan (+7.45% YoY); East China was 1,219 billion yuan (YoY +35.61%); South China was 3.837 billion yuan (+6.84% YoY); Central China was 1,085 million yuan (-10.53% YoY); Northwest China was 643 million yuan (+9.85% YoY). Growth differentiation between regions is also expected to vary in regional consumption capacity in terms of acceptance of high-end products.
Increased cost efficiency drives profit improvement, and profit growth driven by increased human efficiency is expected to continue. Yanjing Brewery's net interest rate for 2023 increased by 1.87 pct to 4.54% year on year, with gross margin +0.19 pct to 37.63% year on year, and the period expense ratio -0.68 pct year on year to 23.03% year on year. Detailed changes: sales expenses ratio (-1.29 pct year over year), management expenses rate (+0.7 pct year over year), R&D expenses rate (-0.06 pct year on year), and financial expenses ratio (-0.02 pct year on year). Looking at 2023Q4 alone, the company's net profit margin fell 0.29 pct year on year to -17.32%, with gross margin -10.79 pct to -6.57% year on year, and the period expense ratio -1.77pct to 6.73% year on year. Detailed changes: sales expense ratio (-7.86 pct year over year), management expense ratio (+7.43 pct year over year), R&D expense ratio (-1.38 pct year over year), financial expense ratio (+0.04 pct year over year). In 2023, the average labor production cost per ton fell by about 18.01% year on year, and the cost rate was reduced. However, termination benefits reached 148 million yuan during the reporting period (a significant increase from 51 million yuan in the same period last year), and the profit improvements brought about by the increase in employee efficiency are expected to continue to be realized in the future.
Focusing on the 14th Five-Year Plan, the company continues to promote marketization, modernization and internationalization, strengthen headquarters functions, continuously improve changes in production, marketing, marketing and supply chain business fields, and achieve high-quality improvements in business performance. The large single product U8 has maintained its upward momentum, and reduced staff and efficiency, and subsidiary losses have already begun to bear fruit. Looking ahead to 2024, it is expected that U8 products will continue to grow rapidly, driving the company's overall volume and price growth trend. Furthermore, the decline in raw materials, labor, etc. costs is expected to increase the improvement in gross margin in 2024, driving acceleration on the profit side. Net profit due to mother in 2024/2025 is estimated to be 991/1,296 million yuan, EPS 0.35/0.46 yuan respectively, corresponding PE is 28/21X, maintaining a “buy” rating.
Risk warning
1. Risk of slow recovery in demand; 2. Industry competition further exacerbates risks; 3. Risk of changes in consumer consumption habits; 4. Risk that prices of some raw materials will continue to rise, etc.