Incident: In 2023, the company achieved revenue of 31.928 billion yuan, +21.8% year-on-year; net profit to mother was 10.438 billion yuan, +28.93% year-on-year. In the first quarter of 2024, we achieved revenue of 15.338 billion yuan, +20.94% year-on-year; net profit to mother was 6.262 billion yuan, +29.95% year-on-year.
Comment:
1. Highlights of the annual report: Achieved 30 billion+ revenue & 10 billion+ profit for the first time in the whole year.
(1) Looking at the product structure, alcohol revenue was 31,743 billion yuan, +21.9% year over year, of which ① high price liquor revenue was 23.203 billion yuan, sales volume +11.3% year over year, tonnage price +10.1% year over year, gross margin +0.11pct to 84.09% year on year; ② low price liquor revenue was 8.54 billion yuan, +20.2% year on year, sales volume +18.5%, tonne price +1.4% yoy, gross margin -1.09pct to 51.65% yoy. The Blue and White series accounted for 46% of sales, with revenue of about 14.6 billion yuan. Blue and White 20 became the top 10 billion single product, with outstanding high-end brand highlights; Xinghuacun Liquor continues to strengthen complementary links with Fenjiu; and Zhuye Qingjiu firmly controls the product price lifeline and strengthens terminal construction.
(2) Looking at regional distribution, ① the province's revenue is 12.084 billion yuan, sales volume +17.7%, tonnage price +2.3%, and the company continues to establish a leading share position to guide the trend of consumption upgrading; ② revenue from outside the province is 19.659 billion yuan, +22.84% YoY, sales +15.6% YoY, and tonnage price +6.3% YoY. At present, the market layout of the “Fragrant World” has been initially formed. The company's 1 billion yuan market continues to increase, and the core market south of the Yangtze River is growing by more than 30% year on year.
(3) In terms of profitability, gross margin was -0.05 pct year over year, operating tax rate was +0.71 pct year over year, sales expense ratio -2.91 pct year over year, management expense ratio -0.87 pct year over year, R&D expense ratio +0.05 pct year over year, financial expense ratio +0.12 pct year over year, and net profit margin to mother was +1.81 pct year on year to 32.69%.
2023 is the company's “year of management modernization and upgrading”. On the basis of achieving a 20% increase in revenue, the amount of advertising and business promotion expenses has declined throughout the year, and the cost efficiency ratio has increased markedly, continuously improving the level of refined management, and achieving flexible release on the profit side.
2. Highlights of the first quarterly report: Unabated growth potential and abundant cash flow.
(1) The trend of product structure upgrading is still obvious. Liquor revenue was 15.296 billion yuan, +21.2% year over year, of which ① medium and high-priced liquor revenue was 11.86 billion yuan, +24.9% YoY; ② revenue from low-priced liquor was 3.436 billion yuan, +9.9% YoY. At present, the company has achieved a large single product layout at multiple core prices, and made concerted efforts to build growth potential. ① The fragrance wine cultivation market increases the amount of Bofen in the mature liquor market; ② Blue and White 20 needs to make greater breakthroughs “fast and good”; ③ blue and white products 30 and above need to explore and create a successful development model in line with high quality lifestyle culture and consumer culture.
(2) The nationalization process continues. ① Revenue from within the province was 5.597 billion yuan, +11.44% year on year; ② revenue from outside the province was 9.7 billion yuan, +27.61% year on year. Revenue from outside the province accounted for a record high, +3.19pct to 63.41% year on year. We believe that in combination with the current promotion of “enjoy benefits”, it will be easier for the company to better control the channel profit distribution structure and product price market, help improve channel momentum, and achieve the continuation of development potential. Currently, the company's market atmosphere south of the Yangtze River continues to improve, and it has received further recognition from commercial consumption. Large single products have outstanding sales advantages at the core price.
(3) Net profit margin exceeded 40%, gross margin for the first quarter +1.9 pct year on year, operating tax rate -1.05 pct year on year, sales expense ratio -0.48 pct year on year, management expense ratio -0.09 pct year on year. Profitability reached a record high. Net profit margin was +2.83 pct year over year to 40.83%.
(4) Cash flow remained strong, with sales revenue of 14.202 billion yuan, +44.66% year-on-year, net operating cash flow of 7.041 billion yuan, +105.1% year-on-year, and contract liabilities of 5.59 billion yuan at the end of the first quarter, or +1,418 billion yuan year-on-year.
Profit forecast and investment rating: In 2024, the company aims to increase revenue by about 20% year-on-year. We expect the company's diluted earnings per share to be 10.96 yuan, 13.46 yuan, and 16.38 yuan respectively in 2024-2026, maintaining the company's “buy” rating.
Risk factors: business demand recovery falls short of expectations; industry competition intensifies; market development falls short of expectations