Incident: The company announced 2023 & 24Q1 results. In 2023, it achieved revenue of 17.76 billion yuan, a decrease of 2.31%, net profit to mother of 136 million yuan, an increase of 127.04%, net profit after deducting net profit of 99 million yuan, an increase of 275.56%, and net cash flow from operating activities of 1,614 billion yuan, an increase of 20.5%. On a quarterly basis, 2023Q1-2024Q1 achieved revenue of 49/42/48/39/5.2 billion yuan, -4%/-8%/+6%, net profit of 1.37/0.46/0.24/-0.72/147 billion yuan, +5%/+9%/+72%/year-on-year loss/+7% year-on-year, net profit of 1.34/0.38/0.19/ -0.93/136 billion yuan, year-on-year +8%/+22%/+820%/+820%/year-on-year loss. Among them, 2023Q4 showed a net loss, which we expect is mainly due to: 1) the closure and adjustment of some stores in the original supermarket business; 2) the expansion of discounts and upfront investment in the new snack shop format; and the revenue and profit of the 2024Q1 company have achieved steady growth.
Comment:
In 2023, the company plans to pay a cash dividend of 1.90 yuan (tax included) for every 10 shares. The total cash dividend is expected to be 120 million yuan (tax included), with a dividend rate of 88%.
By the end of 2023, the company issued convertible corporate bonds to raise a net capital of 630 million yuan, with a cumulative investment of 290 million yuan; raised a net capital of 400 million yuan for stock issuance projects to specific targets, with a cumulative investment of 360 million yuan. All funds raised will continue to be used for fund-raising projects such as supermarket chain transformation, Weihai logistics renovation and expansion, Shanghe Smart Industrial Park (Phase I), and Yangting Shopping Plaza.
Deeply cultivate Shandong, strengthen regional brands and expand new business formats. Taking advantage of its supply chain capabilities and scale, the company continued to innovate in the business format. In 2023, it launched the snack chain brands “Yueji Snacks” and “Haohuixing Discount Store” to expand the market through a combination of self-operation and franchise. Within 2023, 110 new stores were opened, including 81 directly operated and 29 franchised; among them, 56 new types of Yue Ji Snack Stores and 7 Haohuixing Discount Stores. 2024Q1 opened 20 new stores, including 12 direct-run stores and 8 franchisees. As of the end of the 24Q1 period, there were 1,065 direct stores, including 999 direct stores and 66 franchise stores; by business type, 261 comprehensive supermarkets, 409 community fresh food supermarkets, 227 rural supermarkets, 67 snack stores, 8 Haohuixing discount stores, and 93 convenience stores; 24Q1 newly opened snack stores and discount stores, respectively.
By product, fresh product/food cleaning/department stores achieved revenue of 70.5/86.9/62 billion yuan respectively, or -7.5%/-1.2% year-on-year, with gross margins of 17.71%/19.85%/35.58%, respectively, and +0.53/+0.47/+0.81 PCT year on year. Strengthen logistics systems and product strength, and continuously improve supply chain capabilities. In 2023, private brands and customized products accounted for 13.5%, up from 13.2% in 2022.
By sales model, self-operated/joint business/supply chain sales in 2023 achieved revenue of 159.0/2.0/250 million yuan, respectively, -0.7%/-3.3%/-49.5% year-on-year, and gross margins of 18.68%/100%/7.77%, respectively, and +0.27/year-on-year flat/+5.46PCT.
In terms of profitability, the profitability of 2023 and 2024Q1 both improved year over year. The comprehensive gross profit margin in 2023 was 23.88%, up 0.63 PCT year on year, the sales/management/finance expense ratio was 18.85%/2.12%/1.36%, +0.19/+0.12/-0.2PCT year on year, the net profit margin was 0.76%, up 0.66 PCT year on year. 24Q1 comprehensive gross profit margin 24.04%, year-on-year -0.62PCT, sales/management/ financial expense ratio 16.92%/1.86%/1.24%, year-on-year -0.18/-0.1/-0.12PCT, net sales margin 2.94%, year-on-year +0.12PCT.
Profit forecast and investment rating: We expect the company's 2024-2026 revenue to be 196/205/21.3 billion yuan, up 10%/4%/4%, net profit to mother of 2.54/3.04/322 million yuan, up 87%/19%/6%, and EPS 0.40/0.48/0.50 yuan, respectively. Corresponding to the closing price of April 22, PE is 26/22/21X, respectively, maintaining the “increase” rating.
Risk factors: Outreach regions and new business formats fell short of expectations, CPI declined, and regional competition intensified.