Key points of investment
The company achieved operating income of 2,401 billion yuan in 2023, +43.76% year on year, +64.17% year on year, realized net profit attributable to parent company owners of 304 million yuan, +224.91% year on year, +53.91% year on year, net profit margin of 12.66%, 7.06 pct year on year, and -0.84 pct year on year.
In 2024Q1, the company achieved operating income of 691 million yuan, +28.01% year on year, +65.52% year on year, net profit attributable to parent company owners of 66 million yuan, -8.84% year on year, -6.34% year on year, net profit margin 9.54%, 3.86 pct year on year, and -7.32 pct year on year.
The company entered a period of accelerated expansion, and the number of stores expanded rapidly. As of the annual report, the total number of the company's stores was 106, +22 compared to the previous year, while Tongqing Lou, Fumao, and the new brand had 53, 4 or 49, respectively, and +6/+2/+14 compared to the same period last year (it is estimated that the 2023 Tongqing Building Company statistics include wedding halls). In 2023, the company's operating area was 533,000 square meters, +30% compared to the same period. In 2024, it is expected to add 265,000 square meters of area, +49% over the same period last year, and the operating area is expanding rapidly.
In 2024, the company opened three new large-scale stores in Q1, including two Fumao (a Gaoxin Fumao store area of 65,000 square meters and a Fumao store area of 86,000 square meters in Feixi), and a restaurant store (Baoneng store area of 22,000 square meters in Wuxi). In 24Q1, the company achieved external business in some regions.
In 2023, Fumao contributed 445 million in revenue, +140.8% year over year, achieving net profit of 54.604 million yuan, or +159% year over year. We expect the business performance of Binhu Fumao and Yaohai Fumao to climb rapidly. After deducting Fumao's revenue, the company achieved main business revenue of 1.96 billion yuan, +31.7% year-on-year; after deducting Fumao's non-net profit, it achieved a main business profit of 199 million yuan in 2023, +272% year-on-year, and +11.2% compared to 2019. The main business remained stable, and the same store is expected to increase.
Q1 The order side was in line with expectations, and profit margins declined due to store openings. The company's 24Q1 revenue increased 28.01% year-on-year. Although the net profit side fell 8.84%, it is necessary to consider the 12.1562 million levy compensation received in 2023Q1 (not profit or loss), so the 24Q1 profit growth rate is still 5.32%. The profit growth rate after deduction was lower than the revenue growth rate mainly due to the loss of 3.65 million yuan in new stores. Q1 expansion brought an increase of 4.5 million yuan in marketing and digital construction, a decrease of 1,827,900 yuan in cash and financial management revenue, and an additional 3.4633 million yuan in interest expenses.
Investment advice: Considering the rapid expansion of the company's business area in 24 years, the steady increase in the Fumao brand's potential in the restaurant industry, the company is expected to achieve net profit of 3.46/4.70/ 601 million yuan in 2024/2025/2026, +13.72%/+35.82%/+27.97%, corresponding to 20X/15X/12X, maintaining the “buy” rating.
risk factors
Consumption recovery falls short of expectations, competition increases risks, and natural disasters.