Matters:
Tongqing Lou released its 2023 annual report, achieving revenue of 2,401 billion yuan, an increase of 43.76%; net profit to mother of 304 million yuan, an increase of 224.91%; deducted non-net profit of 253 million yuan, an increase of 240.03% over the previous year; and basic earnings per share of 1.17 yuan. The company plans to distribute a cash dividend of RMB 4.10 (tax included) for every 10 shares. 24Q1 achieved total revenue of 691 million yuan, up 28.01% year on year; net profit to mother of 658.991 million yuan, down 8.84% year on year; deducted non-net profit of 64.496 million yuan, up 5.32% year on year; net cash flow from operating activities was 189 million yuan, down 21.66% year on year.
Commentary:
In terms of opening stores, 8 new stores were opened in '23, including 6 restaurants, 2 hotels, 4 restaurants (Changzhou Menghe store, Chuzhou Yueda store, Nanjing Jurong store, Nanjing Cathay Pacific store), 2 wedding banquet stores (Hefei Wanghucheng store, Huaibei Suixi store), and the opening of the Wuxi Baoneng store was postponed until January 2024 due to the construction schedule. In 2023, the company transformed 9 old restaurants and optimized the model. In addition to the main brand, the “Tongqing Pastry Group” brand and the “Qingxiao Guangdong” brand were added, and the brand matrix was richer. In '24, the company plans to expand the markets of Anhui, Jiangsu, and Beijing while expanding the Yangtze River Delta and Taihu Lake. The restaurant business plans to expand 8-12 stores and expand 20 property stores as new store reserves. The hotel business plans to open 4-6 new stores and 2-4 projects under construction.
Two new Fumao hotels were opened in '23, namely Fumao in Beicheng and Fumao in Fuyang. Preparing 3 hotels (Gaoxin Fumao, Feixi Fumao, Shanghai Fumao). As of the date of disclosure of the annual report, Fumao opened 6. During the period, Fumao achieved revenue of 445 million yuan, an increase of 140.84% over the previous year, and Fumao's share of revenue increased to 19%. 23 The revenue from the restaurant and hotel business increased 41% year-on-year for the whole year.
In '23, the company achieved revenue of 167 million yuan from the food business, an increase of 78.28% over the previous year. The food business was mainly based on products such as prepared dishes, frozen food, mooncakes, rice dumplings, etc., and entered into leading supermarket channels such as Fat Donglai, Marketplace, and Hema, and opened 150 supermarket stores in joint ventures with leading retail companies in the region. The franchise business is mainly “Tongqinglou Fresh Meat Dabao”. As of the date of disclosure of the annual report, 80 fresh meat dabao stores have opened, and 60 are yet to be opened. It is estimated that 300 supermarket stores will be opened in '24, and the fresh meat big bag store plans to open 400 community stores.
In terms of expense ratio, gross margin increased as revenue scale increased (gross margin +9.31pct for food and lodging business, +5.07pct), 26.6% (+8.3pct) in 2023, sales expenses ratio was 4.84% (+0.9pct), and management expenses ratio was 6.13% (-0.8pct). The increase in sales expenses was mainly due to an increase in company promotion expenses and new store opening expenses.
The Q1 company opened 2 new Fumao stores in '24, with a high-tech Fumao store area of 65,000 square meters, a Feixi Fumao store area of 86,000 square meters, 1 restaurant, and the Wuxi Baoneng store area of 22,000 square meters. Revenue also increased 28.01% to 691 million yuan in the first quarter, mainly contributing to new stores. Among them, the same store grew 6.21%, and the newly opened stores contributed 86.09 million yuan. If Q1 were to deduct the impact of non-recurring profit and loss, net profit increased 5.32% year-on-year. The profit side growth rate was lower than that of the Singpo store. period, Also, expenses such as marketing, digital construction, and interest on bank loans have increased.
Investment suggestion: At this stage, the company has gradually entered a period of accelerated development, forming a development pattern where the three sectors of catering, hotels and food are mutually driven. At the same time, large-scale replicated growth poles of asset-light chain management represented by the export of “Fumao” Hotel and the “Tongqinglou Fresh Meat Big Package” franchise have begun. Based on catering, we have increased the EPS forecast for 2024-2025 to 1.46 yuan, 1.74 yuan (previous values were 1.35 yuan, 1.69 yuan), new additions The 26-year forecast is 2.06 yuan, and the corresponding valuations are 19, 16, and 13 times PE, respectively. We emphasize that the stability of the company's banquet demand is better than that of ordinary restaurants, and that medium- to long-term store opening is expected to accelerate, giving 25 times PE in 24 years, and the corresponding stock price is 36.5 yuan, maintaining a “recommended” rating.
Risk warning: changes in marriage customs, further decline in marriage rates, cross-regional business risks, food safety risks, repeated risks of the epidemic, falling short of expectations in opening stores, falling short of expectations, offsite replication and expansion falling short of expectations, industry competition risks, and store leasing risks.