Net profit losses narrowed in 2023, and 2024Q1 companies with good business performance growth released the 2023 annual report and the first quarter report of 2024: in 2023, they achieved revenue of 78.642 billion yuan (-12.7% YoY, same below), net profit to the mother of 1.29 billion yuan, a year-on-year decrease of 52%; 2024Q1 revenue of 21.65 billion yuan (-9.0%), and net profit of 736 million yuan (+4.6%). Considering industry competition, we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. We expect net profit to be 0.86 (-3.96) /4.23 (-4.77) /870 million yuan for 2024-2026, corresponding EPS of 0.01 (-0.04) /0.05 (-0.05) /0.10 yuan, and the current stock price corresponding to PE is 240.9/49.0/23.8 times. We believe that the company strives to accelerate the pace of transformation, deeply cultivate supply chain building+build a technology center to drive performance development, and further build competitive barriers in the fresh food category. It is expected that it will cross the inflection point and start again, the valuation is reasonable, and maintain a “buy” rating.
Operating revenue was pressured by store adjustments and consumer consumption trends. Looking at the good gross margin recovery trend by sector, the company's retail/service sector achieved revenue of 73.7.1/4 billion yuan in 2023, or -12.4%/-17.3% year on year; by product, fresh and processed/food products (including clothing) achieved revenue of 330.6/40.65 billion yuan, respectively, -17.1%/-8.1% year on year. The slight decline in revenue was mainly due to changes in the company's adjustment and closure of some stores, as well as changes in residents' willingness and ability to spend. In terms of profitability, the company's comprehensive gross margin in 2023 was 21.2% (+1.6pct), and the sales/management/finance expense ratio was 18.7%/2.4%/1.7%, respectively.
The 2024Q1 company's comprehensive gross margin was 22.9% (+1.6pct), and the sales/management/finance expense ratios were 15.6%/2.0%/1.4%, respectively. The gross margin recovery trend was good, and the expense ratio was basically stable.
Continue to strengthen omnichannel strategic transformation and promote various aspects of digital construction (1) Store optimization: in 2023, the company opened/closed 12/45 stores and 10 newly signed stores, with a total of 1,000 supermarket stores by the end of 2023; the company actively adjusted and closed the optimization channels for departmental stores.
(2) Omni-channel strategic transformation: In 2023, the online business revenue was 16.1 billion yuan, accounting for 20.5% of revenue. “Yonghui Life”'s self-operated home delivery business has covered 920 stores, and the number of registered members has reached 115 million (+13.9%).
(3) Digital construction: Based on an omni-channel, full-link, and efficiently usable digital platform, digitalization and intelligence comprehensively drive organizational process change and business innovation, and optimize supply chains, stores, retail platforms, etc.
Risk warning: Market competition is fierce; the development of new business formats falls short of expectations; same-store growth is slowing down.