Incident: The company released its 2023 annual report and 2024 quarterly report. In 24Q1, the company achieved revenue of 690 million yuan/ +28%, net profit attributable to mother of 70 million yuan/ -9%, and net profit of 60 million yuan/ +5% after deducting non-return to mother.
In 2023, we achieved revenue of 2.4 billion yuan/ +44%, net profit attributable to mother of 300 million yuan/ +225%, net profit of 250 million yuan/ +240% after deducting non-return to mother. The previous earnings forecast was that net profit for the full year of 2023 was 273-320 million yuan, after deducting net profit of 230 to 270 million yuan. The results fell around the median value of the guideline.
Quarterly report disassembly: The opening of new stores drives revenue growth, but affects profit margins. If capital expenses and expenses related to opening a store are not taken into account, the increase in revenue is the same as deducting non-net profit.
1) Revenue side: Revenue growth in 24Q1 mainly comes from newly opened stores, 3 new stores in 24Q1:65,000 square meters of Hi-Tech Fumao, 86,000 square meters of Feixi Fumao, and 22,000 square meters of Wuxi Baoneng. The new stores contributed 86.09 million yuan in revenue and losses of 3.65 million yuan; the revenue of old stores increased 6.2%.
2) Expenses and other expenses: The opening of a new store includes expenses such as one-time investment in start-up expenses, depreciation and amortization of assets; investment in marketing, digital construction, etc. also increased by about 4.5 million yuan; cash financial management revenue decreased by 1.83 million yuan, and additional interest expenses were added by 3.46 million yuan.
3) Non-recurring profit and loss: 23Q1 received compensation of 12.16 million yuan for renovation, resulting in a year-on-year decline in 24Q1.
Dismantling of annual reports: The hotel and food businesses are growing rapidly. 1) Catering business: In 2023, the company opened 6 new restaurants, including 4/2 restaurants/wedding banquet stores, and renovated 9 old restaurants; 2) Hotel business: In 2023, Fumao Hotel's revenue was 445 million yuan, an increase of 141%. In 2023, 2 new hotels (Beicheng Fumao, Fuyang Fumao) were being prepared, and 3 hotels (Gaoxin Fumao, Feixi Fumao, Shanghai Fumao). As of April 25, '24, Fumao Hotels had opened 6, ranking first among luxury hotel brands in Anhui Province. 3) Food business: Rapid growth, 2021-2023 revenue 0.15/0.94/167 million yuan, respectively. Furthermore, as of April 25, '24, Tongqinglou Fresh Meat Dabao had opened 80 stores and 60 stores to open.
2024 business plan: 1) Catering business: In 2024, it is planned to expand 8-12 stores and expand 20 store properties as new store reserves. 2) Hotel business: In 2024, the company plans to open 4-6 new stores and 2-4 projects under construction. 3) Food business: Offline, we focus on strengthening in-depth strategic cooperation with leading channels and jointly opening about 300 in-store stores with leading supermarkets; Tongqinglou Fresh Meat Big Package plans to open about 400 community stores; online, we focus on developing Douyin channels.
Profit forecast and investment advice: One-stop wedding services build brand scarcity, and are expected to contribute to increased performance; entering the blue ocean market for pre-prepared dishes, its new catering brands are expected to be quickly replicated after maturing and become a new growth point for the company; in addition, with the release of demand for banqueting and catering, stock and incremental stores are expected to benefit. We expect the company's net profit to be 3.5/4.6/577 million yuan in 2024-2026. The current stock price corresponding to PE is 20/15/12X, maintaining the “recommended” rating.
Risk warning: There are risks such as store expansion falling short of expectations, new store performance falling short of expectations, and increased competition in the industry.