Incident: The company released the 2023 annual report and the 2024 quarterly report, achieving revenue of 10.593 billion yuan, -9.3% year over year; realized net profit of 296 million yuan, a year-on-year loss reduction of 56.09%; realized net profit deducted from non-mother - 570 million yuan, a year-on-year loss reduction of 14.98%. 2024Q1 achieved revenue of 4,057 billion yuan, -0.75% year over year; realized net profit of 451 million yuan, +37.42% year over year; realized net profit of 451 million yuan without return to mother, +37.43% year over year.
The macroeconomic environment was weak in 23Q4, demand for core products was under pressure, and revenue declined slightly in 24Q1 under a high year-on-year base. On a quarterly basis, the company achieved revenue of 1,785 billion yuan in the 23Q4 single, -30.59% YoY, and -31.23% month-on-month; realized net profit to mother -0.03 billion yuan, or -99.53% YoY. We believe that it is mainly due to the macroeconomic momentum shift period. Real estate broke down first, new real estate projects fell cold, and sales of the main single product, Bainiu 2, were damaged due to weak demand. 24Q1 had a relatively high base of 23Q1 and a slow recovery in demand, and revenue fell 0.75% year on year.
Liquor sales in Beijing grew steadily, and the slaughter business was under pressure in stages due to the impact of the cycle. In 2023, the company's liquor/slaughter business achieved revenue of 6.823/2.401 billion yuan respectively, -15.9%/-6.1% year-on-year. Looking at the subregions, the Beijing/Waifu regions achieved revenue of 4322/6.271 billion yuan respectively, +8.57%/-18.54% year on year. By the end of 2023, the number of the company's distributors in Beijing/outside Beijing was 74/393, respectively, a net increase of 5/20. As the representative brand of Beijing-style Erguotou, Niulanshan's basic market market is still stable, and the growth rate outside of the province has slowed down.
The Golden Label Bull promotion campaign continues to be invested over a long period of time, and the path of improving the product structure continues. After the real estate is removed, it is lightweight before starting. On the gross profit side, in 2023, the company achieved a gross profit margin of 31.8%, +0.07pct year on year; single 23Q4 gross profit margin of 43.68%, +8.72pct year on year; single 24Q1 gross profit margin of 37.15%, -0.57pct year on year. On the rate side, the company's sales/management/R&D/finance expenses rates were 11.38%/8.08%/0.29%/1.63%, respectively, +2.61/0.73/0/0.26pct; 24Q1 sales/management/R&D/finance expenses were 5.41%/5.44%/0.18%/0.76%, respectively, with year-on-year changes of -3.01/-0.4/-0.01/-0.47pct. In summary, the net profit margin to mother was -2.79% in 2023, +2.97pct year on year, and 11.11% to mother in 24Q1, and +3.09pct year on year. We believe that 2024 will be the first year of divestment of the company's real estate business, and profit performance is expected to continue to improve.
Phased demand is pressured without changing the strategic upgrade path, and profit margins in the first year of real estate elimination need to be improved. The company is deeply involved in low-grade light bottled wine, and the elimination of real estate has improved profit margins. The classic big single product, Bainiu 2, has developed over a long period of time and is cost-effective. It has developed short-term consumer inertia and high channel trust. Sales in Beijing are still stable, and sales performance will be boosted until demand recovers. In April 2024, the second season of the Jinbiao Niu Fireworks Restaurant Selection officially set sail. The cost of upgraded products continued, without changing the medium- to long-term logic of improving the product structure, and waiting for the company to release its profitability after leading the product structure upgrade+real estate business elimination.
Profit forecast: We expect the company's revenue for 2024-2025 to be 10.8875/ 11.815 billion yuan, respectively, +2.7%/+8.6% year-on-year, and net profit to mother of 482/641 million yuan, respectively, maintaining the “recommended” rating.
Risk warning: New product promotion falls short of expectations; macroeconomic recovery environment recovery falls short of expectations; consumer spending power levels fall short of expectations, etc.