23 years of operation under pressure in the short term, waiting to be improved
Revenue/net profit to mother for 23 years was 80/130 million, +0.1%/-5.4% YoY; 23Q4 revenue/net profit to mother was 180/0.3 million, -5.7%/-13.9% YoY. 24Q1 revenue/net profit to mother was 17/0.2 billion, -17.9%/-46.9% YoY. Affected by a weak recovery in the overall consumption environment in '23, demand for C-side prepared dishes stabilized after the impact of the epidemic dissipated, and the company's single-store revenue was under pressure. At the end of '23, there was a net increase of 128 to 1,823 franchisees compared to the end of '22. On the profit side, benefiting from the decline in raw material prices, gross margin was +2.3 pct to 26.4% year over year in '23. Looking ahead, as the company continues to promote new products and actively build a diversified B-side+C-side channel network, it is expected that the company's subsequent performance will improve. The 24-26 EPS is expected to be 0.88/0.97/1.07 yuan. Referring to the 24-year average of 34xPE (Wind agreed expectations), the 24-year average is 34xPE, with a target price of 29.92 yuan, and an “increase in weight” rating.
The diversified expansion of product categories. At the end of '23, there was a net increase of 128 franchisees to 1,823 products, with meat and poultry/fisheries/other revenue of 5.3/2.1/50 million in '23, +0.6% YoY, +0.6%/-2.7%/+5.6%, 24Q1 meat/poultry/fish/other revenue of 1.00/0.5/0.2 billion, -21.4%/-20.2%/+27.8% YoY. By channel, retail channel revenue in '23 was 540 million, -4.8% YoY, of which franchise/dealership revenue was 43/10 million, +0.7%/-23.2% YoY; the net increase of 128 franchisees at the end of '23 compared to the end of '22 to 1,823; and revenue from the wholesale channel was 210 million in '23, or -1.5% YoY.
In '23, the company developed the supermarket business and contributed 0.3 billion in revenue. 24Q1 retail/wholesale channel revenue was 1.1/40 million, -17.0%/-24.9% YoY; 24Q1 supermarket channel continued to develop, with revenue +25.0% YoY to 7.6 million. The company announced a shareholder return plan for the next three years (24-26) to share growth dividends with shareholders.
The gross margin for the year 23/24Q1 was +2.3/-1.2pct year on year, and the net profit margin to mother was -1.0/-6.2pct year on year +2.3 pct to 26.4% year on year (+3.4 pct to 27.1% year on year in 23Q4), mainly due to the decline in raw material procurement costs. On the expense side, the 23-year sales expense ratio was +1.2pct to 5.0% year over year (23q4 +1.3pct to 5.7% year over year), mainly due to the expansion of sales area and increase in sales staff; the 23-year management expense ratio was +1.5pct to 5.4% year over year (23Q4 +2.8pct to 7.6% year over year), and finally the net return rate for 23 years was -1.0pct to 16.9% yoy (23Q4 -1.5pct year-on-year), net non-net interest rate +0.3pct to 16.4% yoy ( (-0.2pct to 14.9% year-on-year in 23Q4). In 24Q1, the company's gross margin was -1.2pct to 25.0% year on year, the sales/management expense ratio was +1.7/+2.9pct to 6.0%/7.5% year over year, expense investment increased year-on-year, and the mother/deducted non-net interest rate was -6.2/-6.0 pct year on year to 11.4%/11.2%.
Looking forward to subsequent management improvements, downgraded to “increase holdings” rating
Considering the uncertainty of the company's subsequent improvement in business conditions, we lowered the 24-25 revenue growth rate by 16.2/8.4 pct, lowered the 24-25 profit forecast, estimated EPS of 0.88/0.97 yuan (previous 1.22/1.37 yuan), introduced a 26-year EPS of 1.07 yuan, and a target price of 29.92 yuan (previous 42.70 yuan), and downgraded it to an “gain” rating.
Risk warning: industry competition intensifies, macroeconomic performance falls short of expectations, food safety issues.