Brief performance review
On April 29, 2024, the company released the 2023 Annual Report and the 2024 First Quarter Report. In 2023, the company achieved revenue of 22.44 billion yuan, +11.2% year on year; net profit to mother of 929 million yuan, +18.4% year on year; net profit after deducting non-return to mother of 844 million yuan, +14.7% year on year.
In Q4 2023, the company achieved revenue of 6.396 billion yuan, -0.05% year on year; net profit to mother was 212 million yuan, +21.17% year over year; net profit without return to mother was 198 million yuan, +17.89% year over year.
In Q1 2024, the company achieved revenue of 5.54 billion yuan, +1.81% year over year; net profit to mother was 321 million yuan, +10.27% year over year; net profit after deducting non-return to mother was 311 million yuan, +10.35% year over year.
Management analysis
The number of stores has increased, and network expansion has declined. In 2023, the company added a total of 3,388 stores, including 1,471 self-built stores, 331 mergers and acquisitions, and 1,586 new franchised stores. In Q1 2024, the company added 642 new stores, including 351 self-built stores, 6 mergers and acquisitions, and 285 new franchised stores. As of the end of Q1 2024, the total number of company stores was 14,109, including 9470 direct-run stores and 4,639 franchise stores.
The company is refining and deepening the sinking market. By the end of Q1 2024, the company's stores in prefecture-level cities and below accounted for 76%.
Outpatient coordination is being promoted on a priority basis, and the performance of co-ordinated stores has improved markedly. In 2023, the company completed the implementation of 4262 outpatient co-financing stores. As of the end of Q1 in 2024, the company had 4,673 outpatient co-ordinated stores, of which direct-managed stores accounted for 39.78%; the company had 3,338 interoperable stores, of which 30.67% were directly managed stores.
Interchangeable stores have seen significant increases in both the number of visitors and sales.
Implement the Torch Project to increase gross profit margin. The company implemented the torch project, transformed the commercial procurement system and key business processes, and made efforts to increase the gross profit margin throughout the procurement and marketing process. In Q1 2024, the company's comprehensive gross margin was 35.2%, up 2.2 pct year on year; consolidated sales accounted for 69.5%, up 1.4 pct year on year; the sales volume of the company's own branded stores was 830 million yuan, accounting for 20.8% of sales, up 1.3 pct year on year.
Profit Forecasts, Valuations, and Ratings
The company has extensive coverage of stores, great potential for improving profitability, and is expected to continue to improve in the long term.
Based on the current development situation, we lowered our 2024-2025 revenue forecast. The original revenue forecast for 2024-2025 was 297.16/35.956 billion yuan. Currently, the company's revenue for 2024-2026 is 266.29/320.37/38.40 billion yuan, respectively, up 19%/20% year on year, and net profit to mother is 11.16/13.68/1.65 billion yuan respectively, up 20%/23%/22% year on year, and EPS is 1.91/2.34/ 2.85 yuan, corresponding to PE at the current price, is 17/14/12 times, respectively, maintaining the “gain” rating.
Risk warning
Risk of uncertainty in epitaxial mergers and acquisitions; risk of prescription outflow falling short of expectations; risk of store development falling short of expectations; risk of internet shock, etc.