The store business continued to adjust. Losses decreased in 23, and net profit to the mother increased 4.6% in 24Q1. Maintaining the 23 annual report and Q1 report issued by the company on April 26, the revenue for 2023 fell 12.7% year-on-year to 78.6 billion yuan, and the net loss to the mother was 1.33 billion yuan. The loss decreased significantly compared to 2.76 billion yuan in '22. 24Q1 The company continued to adjust its store business, and revenue/net profit to mother were -9.0%/+4.6% year-on-year, respectively.
Facing increased market competition, the company took the initiative to adjust and close loss-making stores. As of '23, the total number of the company's stores was 1,000. We expect the company's net profit to reach 6.2, 10.6, and 1.27 billion yuan in 24-26 years (value of 8.8 billion yuan and 1.40 billion yuan before 24-25, mainly due to the company's optimization of the store business). Referring to comparable company Wind's consistent expectations of 16 xPE in 24, considering the intensification of industry competition and the expected increase in Yonghui's share after survival of the fittest, the company was given 35 xPE for 24 years, with a target price of 2.45 yuan (previous value of 4.00 yuan), maintaining an increase rating.
Take the initiative to close loss-making stores and continue to slim down traditional businesses
In '23, the company opened 12 new stores and closed 45 stores. Active adjustments in stores and increased market competition have put pressure on the company's revenue, but at the same time, the company's period expenses have also been significantly reduced. In '23, the company's sales/management/financial expenses decreased by 7.4%, 7.8%, and 14.0%, respectively. In 24Q1, the company's sales/management/finance expenses decreased by 7.3%, 21.7%, and 10.6%, respectively. More importantly, the company's asset impairment losses are gradually decreasing. Asset depreciation was 520 million yuan in '23, a decrease of 110 million yuan compared to '22.
Omni-channel transformation, digitalization and supply chain construction are the company's long-term driving directions in 2023. In terms of omni-channel operations, the company will increase the strength of its own platforms and third-party platforms. The self-operated home delivery business has covered 920 stores and achieved sales of 8.38 billion yuan. The number of registered members of Yonghui Life App has exceeded 115 million. In '23, the company's online revenue reached 161 billion yuan, accounting for more than 20% of total revenue.
In terms of digital construction, it mainly focuses on customer experience to complete infrastructure such as store digitalization and supply chain digitalization. In terms of the supply chain, the company continues to promote refined management and increase sales of its own brands. In '23, sales of the company's own brands reached 3.54 billion yuan, an increase of 8.3% over the previous year.
The traditional offline supermarket business is facing serious challenges. The company's business is slimming down and implementing efficiency improvements and cost reduction. Offline supermarkets are facing the impact of increased competition and reduced offline passenger traffic. The company has experienced a period of adjustment. As macroeconomic growth recovers, we expect the company to reverse losses. We expect the company's net profit to reach 6.2, 10.6 billion yuan, and 1.27 billion yuan in 24-26. Referring to the comparable company Wind, we agree that 16xPE is expected to increase in 24 years. Considering the intensification of industry competition and the expected increase in Yonghui's share after survival of the fittest, the company will be given 35 xPE in 24, with a target price of 2.45 yuan, maintaining an increase in holdings rating.
Risk warning: Macroeconomic growth falls short of expectations, store transformation falls short of expectations, asset impairment exceeds expectations, and changes in fair value drag down profits.