Key points of investment:
The company announced the 2023 Annual Report and the 2024 First Quarter Report, and the results were in line with expectations. According to the company's announcement, 1) In 2023, the company achieved revenue of 78.642 billion yuan, compared to -12.71%. Mainly due to the national economy still recovering, consumer spending intentions declined, and the company continued to adjust the store structure to actively eliminate stores that continued to lose money. Net profit to the mother reached -1,329 billion yuan, or -2,763 billion yuan in the same period in '22, mainly due to a decline in revenue and impairment losses of 436 million yuan in long-term equity investment.
2) The 24Q1 company achieved revenue of 21.65 billion yuan, -8.98% year over year, and net profit attributable to mother and net profit deducted from mother was 736 million yuan/599 million yuan, respectively, or +4.57%/-3.08% year-on-year.
Continued efforts are being made to optimize stores and improve efficiency, and omnichannel transformation is progressing steadily. According to the company's announcement, during the reporting period, the company opened 12 new stores, closed 45 stores, and signed 10 new stores. By the end of 2023, the supermarket business had entered 29 provinces and cities across the country, with a total of 1,000 stores, a decrease of 33 compared with '22. In 2023, the company eliminated some low-quality stores, optimized and adjusted store operations, improved store operation efficiency, promoted online and offline omni-channel digitalization, realized retail channel transformation and upgrading, cost reduction and efficiency, and addressed serious market challenges. Online business revenue for the full year of 2023 was 16.1 billion yuan, accounting for 20.5% of revenue. Among them, product gross margin increased 0.9% year-on-year, mainly due to improvements in product structure and product cost adjustments.
“Yonghui Life”'s self-operated home delivery business has covered 920 stores, achieving sales of 8.38 billion yuan, an average daily order volume of 307,000 orders, and an average monthly repurchase rate of 50%. The third-party platform's home delivery business has covered 910 stores, achieving sales of 7.7 billion yuan, an increase of 8.15% over the previous year, and an average daily order volume of 208,000.
Gross margin improved in 2023, and 24Q1 expenses were well controlled. According to the company's announcement, the company's gross margin for the full year of 2023/2024Q1 was 21.24%/22.85%, +1.56/0.02pct year on year, and the gross margin of the retail/service industry in 2023 was 16.32%/94.72%, +1.98/-0.33pct year on year, and profitability was steadily recovering. In 2023, the company's expense ratio reached 23.15%, +1.05pct year on year. Among them, the sales/management/ financial/ R&D expenses ratio was 18.67%/2.40%/1.68%/0.40%, respectively, with a year-on-year change of +1.07/+0.13/-0.03/-0.13pct. The cost rate for the 24Q1 period was 19.40%, -0.22pct year on year. The sales/management/ financial/ R&D expenses ratio was 15.59%/2.02%/1.45%/0.34%, respectively, with a year-on-year change of +0.29/-0.33/-0.03/-0.15pct.
Improve the digital construction and continue to promote the optimization of supply chain organization. In 2023, Yonghui Technology has basically completed infrastructure construction such as store digitalization and supply chain digitalization. Through the promotion and application of digital tools, the company improved product entry and exit efficiency and price competitiveness, and the efficiency of introducing new products increased by 50% over the same period last year. By promoting the construction of digital stores, the entire store's inventory accuracy rate was 93% +, picking efficiency increased by an average of 20%, and the average labor cost of all warehouse receipts decreased by 9.3% year-on-year. At the same time, the company is deeply involved in the supply chain. It has cooperated with 101 source-seeking manufacturers, established 19 own planting/breeding bases, built 27 direct source harvesting projects, and actively sought differentiated products, such as thumb corn, multi-vegetable corn, etc., to create new tracks to meet the needs of different customers.
Maintain a “buy” rating. The company continues to make full use of its supply chain advantages and promote store scenarios and product innovation to enhance competitiveness. In 2024, the company will continue to deepen digital transformation+innovate processing and catering scenarios, implement refined operation and customized transformation, and promote the all-round upgrading of stores in terms of “scenarios, products and services”. We maintain our profit forecast. The company's net profit for 24-25 is estimated to be 304/618 million yuan, respectively, and the net profit forecast for the additional 26 years is 712 million yuan, corresponding PE is 76/33/29 times, maintaining a “buy” rating.
Risk warning: Industry competition is intensifying, business transformation falls short of expectations, and store transformation falls short of expectations.