Incidents:
Yanjing Brewery released its report for the first quarter of 2024. In 24Q1, the company achieved revenue of 3,587 billion yuan, a year-on-year increase of 1.72%, and realized net profit to mother of 103 million yuan, an increase of 58.9% over the previous year, and realized net profit without return to mother of 103 million yuan, an increase of 81.72% over the previous year.
Profit elasticity has increased, and profit margins are expected to continue to improve.
The company's 24Q1 gross margin increased by 0.4 pct to 37.18% over the same period, probably due to increased profit flexibility under structural upgrades and reforms. The sales expense ratio decreased by 0.56 pct to 11.93% over the same period, driving the company's gross sales margin up 0.96 pct to 25.25% over the same period. The remaining management/ R&D/finance cost ratios were -0.21/-0.07/-0.23 pct to 11.76%/1.9%/-0.95%, respectively. The overall cost rate level was well controlled. At the same time, the corporate income tax rate decreased by 7.3 pct to 21.41% compared to the same period. We estimate that it mainly benefited from the effective promotion of loss reduction efforts by subsidiaries, which comprehensively increased the company's 24Q1 net interest rate by 1.06 pct to 3.61%.
We expect that with the continuous deepening of the company's reforms and efficiency, net interest rates are expected to continue to rise in line with industry leaders.
Furthermore, according to the company's 2023 annual report, the reform achieved remarkable efficiency results. The number of employees was reduced by 2303, and the dismissal dividend increased by 158.56% over the same period last year, accounting for 21.44% of net profit returned to the mother in '23. It is expected that as the reform process gradually deepens, this fee will create profit elasticity for the company this year.
It is expected that profit flexibility will increase rapidly as the company resolutely promotes high-end strategies and further internal efficiency reforms.
Profit forecasting and investment advice
We expect the company's net profit to be 895/11.33/1,416 million yuan respectively in 24-26 years, corresponding to PE of 31/24/19 times. Considering that the company can maintain a high growth rate in the next three years, there is plenty of room for improvement in the profit margins of leading companies in the benchmark industry, and there is strong certainty in performance release, we give the company a valuation of 40 times PE over 24 years, with a corresponding target price of 12.7 yuan/share, maintaining a purchase rating.
Risk warning
Risks such as sales of large single products falling short of expectations, increased competition for high-end grades, and food safety issues