Brief performance review
On April 26, 2024, the company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved revenue of 9.08 billion yuan, +20.8% year on year; net profit to mother was 410 million yuan, +10.7% year on year (adjusted caliber); net profit without return to mother was 40 million yuan, +7.3% year on year (adjusted caliber).
In Q4 2023, the company achieved revenue of 2.58 billion yuan, -8.0% year on year; net profit to mother was 136 million yuan, -23.7% year over year; net profit after deducting non-return to mother was 128 million yuan, -26.6% year over year.
In Q1 2024, the company achieved revenue of 2.31 billion yuan, +6.8% year on year; net profit to mother was 52 million yuan, -31.5% year over year; net profit after deducting non-return to mother was 50 million yuan, -32.3% year on year.
Management analysis
Stores continue to expand, and profitability is yet to be unleashed. In 2023, the company built 799 stores and acquired 272 stores. Due to development plans and business strategy adjustments, 10 stores were closed, a net increase of 1,061 stores. The total number of stores increased by 26.17% compared to the beginning of '23. Among them, there is a total net increase of 205 stores in the Jiliao region, and a total net increase of 444 stores in the Sichuan, Chongqing and Gui regions. The current network layout of stores in 6 provinces and cities has been further improved. As of December 2023, the company had 799 new stores within one year, accounting for 15.62%, and 330 new stores within two years of age, accounting for 6.45%. The total number of new and sub-new stores was 1129, accounting for 22.07%. As the profits of these stores rise, the company's profitability is expected to increase.
First-quarter results were under pressure, and equity incentives showed confidence in long-term development. In Q1 2024, the company had a net increase of 147 stores, and the number of stores reached 5,236, a net increase of 1,071 compared to the end of Q1 in '23. It was basically new stores and consolidated acquisitions, leading to a significant year-on-year decline in the profit side compared to Q1 in '23, where the base was slightly higher. However, short-term performance fluctuations did not change the company's long-term development confidence. The company issued a 2024 restricted stock incentive plan (draft), which plans to grant 261 incentive recipients a total of 1.7649 million shares at a grant price of 26.13 yuan/share, accounting for 1.37% of the company's total issued share capital at the time of announcement. The company's performance assessment index is based on net profit deducted from non-mother in 2023, and the net profit growth rate for 2024/2025/2026 will not be less than 15%/36%/60%, respectively.
Profit Forecasts, Valuations, and Ratings
The company continues to expand the number of stores through self-building+mergers and acquisitions, and its performance is expected to continue to grow. Based on the current development situation, we lowered our 24-25 revenue and profit forecast. The original 24-25 revenue forecast was 120.78/14.291 billion yuan, and the original net profit forecast value was 528/615 million yuan. Currently, revenue for 24-26 is 108.33/128.59/15.156 billion yuan, respectively, up 19%/19%/18% year-on-year, respectively, and net profit to mother is 4.79/56/ 654 million yuan, respectively. The year-on-year increase was 16%/18%/15%, EPS was 3.72/4.40/5.07 yuan respectively, and the current price of PE was 13/11/9 times, respectively, maintaining the “buy” rating.
Risk warning
Risk of uncertainty in epitaxial mergers and acquisitions; risk of prescription outflow falling short of expectations; tax risk; risk of Internet shock; risk of regional income concentration, etc.