Core views
The company's 23Q4 revenue and performance were outstanding, and revenue reached a new high. The increase in 24Q1 deductions was less than revenue due mainly to the impact of new store climbing, marketing and digital construction, and capital expenses. The opening of new stores accelerated in 2023, and the increase in area since 2019 is considerable. Fumao expects excellent profit margins. The company's three-wheel drive is gradually maturing, and continues to promote the nationwide layout and rapid expansion of stores and brands. The acquisition of Jianan has invested in improving the hotel business layout, and its core capacity+growth potential helps the new stage of development.
occurrences
The company announced the 2023 Annual Report and 2024 Quarterly Report. In 2023, we achieved revenue of 2,401 million yuan, +43.76% year on year, and realized net profit of 304 million yuan, +224.91% year on year; in the first quarter of 2024, we achieved revenue of 691 million yuan, +28.01% year over year, and realized net profit of 658.991 million yuan, or -8.84% year over year, achieving net profit without deduction to mother of 644.986 million yuan, or +5.32% year over year.
Brief review
The 23Q4 performance was impressive. The 24Q1 deducted growth rate was affected by some normal factors. The company's 23Q4 revenue was 718 million yuan, +69.72% year-on-year, a record high. The year-on-year growth rate increased markedly month-on-month, achieving net profit of 101 million yuan to the mother, a remarkable performance. 24Q1 net profit after deducting non-return to mother achieved steady growth. The revenue growth rate reached 28.01%, and the main reason why the increase in non-net profit was less than revenue was: (1) Although the new store added 86.09 million yuan in revenue, the new store lost 3.65 million yuan due to one-time investment in new store start-up expenses and expenses such as asset depreciation and amortization; (2) The company's 24Q1 increased its expenditure on marketing, digital construction, etc. by about 4.5 million yuan over the same period last year; (3) The company invested a large amount of money in cash and financial management over the same period last year. Decrease 182.79 Ten thousand yuan, additional bank loan funds, and additional interest expenses of 3.4633 million yuan were added in the current period.
Excluding the above factors, the company's deducted non-net profit should converge with the increase in revenue; in 2023, the company's gross profit margin was 26.62%, +8.29pct compared to the previous year. The cost rate for 2023 was 12.86%, +0.37pct year-on-year. In 2023, compensation for the demolition of restaurant rental stores in Taihu Lake affected a non-recurrent amount of 405.207 million yuan. Net cash flow from operating activities in 2023 was $721 million, a significant increase of +157.74% over the same period last year. By business, food sales revenue in 2023 was 167 million yuan, +78.28% year-on-year, and gross margin reached 35.69%. The revenue from the catering and accommodation business was $1,957 million, +41.00% year-on-year, with a gross profit margin of 20.75%. Looking at the subregion, Anhui Province's revenue was 1,493 billion yuan, +52.53% year-on-year, and the gross profit margin was 19.76%. Business revenue outside the province was 631 million yuan, +25.53% year-on-year, with a gross profit margin of 27.06%. Looking at subsidiary performance, the net profit of Anhui Fumao Hotel Management Co., Ltd. is 54.604 million yuan. Combined with Fumao's operating income, the profit margin is expected to be excellent. Tongqinglou Food Co., Ltd. net profit - RMB 8.037,500. The balance of projects under construction at the end of 2023 was 469 million yuan, an increase of about 16.3% at the end of 2022, including Feixi Fumao's balance of 158 million yuan and Wuhu Dayangli Phase II of 56.6664 million yuan. In 2023, the company plans to distribute a cash dividend of 0.41 yuan per share to all shareholders, for a total of 106 million yuan in cash dividends.
The total amount of shares repurchased by the company in 2023 was 298.777 million yuan, and the total amount of cash dividends after this amount was 136 million yuan, accounting for 44.74% of the company's net profit in 2023; the company changed the address of the fund-raising project to open a new hotel chain and changed the implementation locations of 9 direct-run stores that have not yet been implemented from “Hefei, Changzhou, Nanjing” to “Hefei, Chuzhou, Shanghai, Huaibei, Wuxi, Changzhou, and Zhenjiang”.
Diversified business formats are maturing, and high-quality expansion potential is expected to be gradually unleashed
The company plans to use its own capital of 115 million yuan to acquire 95% of the shares of Hefei Jianan Investment Management Co., Ltd. held by the controlling shareholder Ma Investment Company and 5% of the shares of Jianan Investment held by the actual controller Lu Yuezhen. The proposed acquisition of Jianan Investment's assets is clear, and there is only one large-scale project under construction. The project is located at the northeast corner of Changjiang West Road and Huaining North Road, the main urban road in Hefei. It is a TOD subway superstructure project. The overall planning and design area of the project is 142,300 square meters. A total of 5-story integrated podium, a 22-story luxury hotel, and a 17-story serviced apartment building are planned. After completion, the project is expected to achieve an annual turnover of no less than 400 million yuan, which will bring a landmark hotel and significant benefits to the Fumao series of products. Fumao Hotel is undergoing a grid investment layout in Hefei, the capital of Anhui Province. Currently, it has opened 5 businesses and is preparing to build 2:1 in Yaohai District on the east side of Hefei (Fumao, Yaohai), 1 in Hefei West High-tech Zone (Gaoxin Fumao), 1 in Hefei Nanbanghe District (Binhu Fumao), 1 in Hefei North Railway Station (Xinzhan Fumao), Hefei Changfeng opened 1 (Beicheng Fumao), Hefei West Fumao (West Fumao)), Hefei Feidong plans to build 1 house (Feidong Fumao).
The company's store area has grown rapidly in recent years. By the end of 2019, the total store area was 245,900 square meters, and 191,800 square meters of store area were added from 2020 to 2022. An additional 122,500 square meters were added in 2023. An additional 264,900 square meters are planned for 2024. Fumo has achieved revenue of 445 million yuan in 2023.
The food business continues to develop online and offline channels and explosives. The company's three-wheel drive model has gradually matured, and the nationalized high-quality store expansion + brand effect has gradually shown to enhance spatial capacity, and it is expected to enter a new stage of development.
Investment advice: Net profit due to mother is expected to be achieved from 2024 to 2026 of 357 million yuan, 464 million yuan, and 593 million yuan. Current stock prices correspond to PE of 20X, 16X, and 12X, respectively, maintaining a “buy” rating.