Key points of investment:
The company announced reports for the first quarter of 2023 and '24, and the results were in line with expectations. According to the company's announcement, 1) The company achieved revenue of 1,432 billion yuan for the full year of 2023, a year-on-year increase of 99.27%, and recovered to 91.45% in 2019, achieving net profit of 60 million yuan to mother and a loss of 280 million yuan for the same period in '22, an increase of 34.53% over the same period in 2019. 2) The 23Q4 company achieved revenue of 342 million yuan, a year-on-year increase of 122%, a net loss of 12 million yuan to mother, and a loss of 100 million yuan in the same period last year, reducing losses over the same period last year. 3) The 24Q1 company achieved revenue of 358 million yuan, an increase of 12% over the previous year, and net profit of 15 million yuan to mother, an increase of 66.9% over the previous year.
Stock stores are grasping traditional businesses and striving to recover performance, and the three major stores are leading the upgrading of restaurants. According to the company's announcement, the company will have a total of 101 restaurants in 2023, including 48 direct-run stores, 53 franchised stores (including 8 overseas franchised stores), and 2 food processing enterprises. The company is rushing up the peak consumption season during the holidays and short holidays. By optimizing services and products, during the Mid-Autumn Festival and National Day holidays, food and beverage revenue increased 11% compared to 2019, reaching a 5-year high, and many stores also repeatedly set single-day business records. At the same time, the company's stores meet the needs of different consumer groups, optimize food flavors, create different dining environments and special services, attract customers, and enhance store performance. The company's three major stores have become an important engine for performance growth. The revenue of Heping Store's “China Yijie · Sky Courtyard” accounts for 42.8% of all store revenue, the Qianmen store's “Central Food Gift” project revenue accounts for 21% of the store's revenue, and Wangfujing's “Gong Xi Longfeng Chengxiang” is at the top of the list of specialty dishes, accounting for 46.2% of the store's revenue.
Duck products continue to innovate, and a new “Zero Research Institute” has been built to enter the rest circuit. According to the company's announcement, in the food sector, the company continued to enrich duck products, restructured the three major series of “sauce,” “roast,” and “roast”, and refined techniques to make roasted duck by hand. The “sauce” series of popular sauce duck products achieved a 219% year-on-year increase in revenue throughout the year. The company launched the sub-brand “Zero Research Institute” and launched 7 products to enter the snack food circuit. The company adopted a channel upgrade strategy, transformed offline to serve the local customer base, enhance brand promotion reach, increase investment in online operations, and continue to empower performance growth through online and offline integration.
Profitability is growing steadily. According to the company's announcement, the company's comprehensive gross margin in '23 was 18.14%, +31.03pct year on year, with a year-on-year cost ratio of 15.74%, a year-on-year decrease of 15.26pct. Among them, the sales/management/R&D/finance expenses ratio was 3.9%/11.4%/0.2%/0.3%, respectively. The year-on-year change was -3.0/-11.0/-0.3/-0.9pct, and the net profit margin to mother reached 4.20%.
The profitability of the 24Q1 company was further improved, achieving a gross profit margin of 19.4%, +1.8 pct year on year, with a year-on-year cost ratio of 17.22%, up 0.25% year over year. Mainly due to the company's increased marketing and promotion activities and increased rent for cold storage renovation, the sales expenses ratio increased 1.12 pct year over year to 4.66%, and the comprehensive impact on the 24Q1 net profit margin reached 4.28%.
Investment analysis opinion: The structural adjustment of the company's dishes and stores is beginning to bear fruit. It is expected that it will continue to give full play to the advantages of long-established brands and achieve the collaborative development of catering+food+group meals. Considering the company's focus on improving user experience and continuously optimizing and upgrading existing stores and new stores, we reduced net profit to mother of 0.83 billion yuan in 24-25 (original value was 1.04 billion yuan), and the net profit forecast for the additional 26 years was 136 million yuan, corresponding to PE 37/26/23 times for 24-26. According to the PEG estimates of comparable companies Guangzhou Restaurant and Weizhixiang Comparable Company, we gave the company an average PEG of 1.1 times that of comparable companies in 24 years, corresponding to a target market value of 3.7 billion yuan. The current market value corresponds to 21% room for growth, and maintains a “buy” rating.
Risk warning: food safety risks, increased competition in the prepared food industry, shortage of senior technical management personnel, etc.