The company released its 2023 annual report. The company achieved revenue of 18.985 billion yuan in '23, +3.72% year-on-year; achieved revenue of 4.207 billion yuan in the fourth quarter, +10.86% year-on-year. The company achieved net profit of 1,315 billion yuan in 23 years (performance forecast is 1.25 to 1.37 billion yuan), +48.84% year-on-year, and achieved net profit of 187 million yuan in the fourth quarter, or +213.17% year-on-year. The company plans to distribute 13.56 yuan for every 10 shares, with a dividend payment ratio of 45.63%.
Revenue side: In '23, the company's department store/supermarket/electrical/auto trade business achieved revenue of 20/62/29/6.1 billion yuan respectively, +8.8%/-5.5%/+19.5%/+13.2% year-on-year. Business development has continued to improve in 23 years, and performance has maintained good growth. 1) Actively explore and build a local lifestyle ecosystem, and the sales performance of retail owners is growing steadily; 2) Immediate consumer business performance with 31.06% shareholding remains stable; 3) The investment in Chongqing Dengkang Dental's listing contributed to a significant increase in profits over the same period; 4) Selling 95% of Chongqing Shiyi Product Quality Inspection Company's shares.
On the gross margin side: The gross margin of the company's main business in '23 was 19.89%, +0.28pct. Mainly department stores under the company increased the share of sales of joint products. Supermarkets strengthened gross profit control, raised gross profit, and reduced losses.
Cost side: The company's expense ratio for the 23-year period was 19.59%, -2.08pct year over year. Among them, the sales expense ratio was 13.75%, -1.67pct year on year, mainly due to a decrease in the company's operating personnel remuneration and leasing expenses; the management expense ratio was 5.05%, -0.30pct year on year, mainly a decrease in company managers' remuneration, depreciation and amortization expenses; the financial expense ratio was 0.65%, compared to -0.09% year on year, mainly due to an increase in shareholders' deposits and interest income; and the R&D expense ratio was 0.14%, -0.02pct year on year, mainly due to a decrease in IT R&D project expenses.
The brand & scale advantage is obvious, and the share of member sales has increased. The company owns famous commercial brands such as Chongqing Department Store, New Century Department Store, Trading Company Electronics, and Trading Company Auto Trade. Among them, “Zhongbai” and “New Century Department Store” are “famous trademarks in China”. By the end of '23, the company had 281 operating outlets based on the size of the business format, including 50 department stores, 152 supermarkets, 41 electrical appliances, and 38 auto trade businesses. With the expansion of the company's outlets to the outside world, scale advantages continued to show, and market influence continued to increase. The company has 27.6 million members, with member sales of 16.5 billion yuan, accounting for 59% of total retail sales, +7.15 pct.
Investment advice: Zhongbai continues to optimize the internal governance structure and is optimistic about the steady growth of the company's main business. Immediate consumption of shareholders is expected to grow rapidly through continuous innovation and service improvement, and continue to increase the company's profits. We expect the company's net profit to be 14.4/16.0/1.77 billion yuan in 24/25/26, respectively, corresponding to 8/7/7xPE, respectively, to maintain a “buy” rating.
Risk warning: operating risk, sales falling short of expectations, profit of holding companies falling short of expectations, etc.