Incident 1: The company released its 2023 annual report. In 2023, the company achieved operating income of 33.126 billion yuan, an increase of 10.04% over the previous year, and achieved net profit of 10.016 billion yuan to mother, an increase of 6.80% over the previous year.
Incident 2: The company released its 2024 quarterly report. In 1Q24, it achieved operating income of 16.255 billion yuan, an increase of 8.03%, and net profit to mother of 6.055 billion yuan, an increase of 5.02%.
4Q23 controlled the price, and the actual payment was steady. The company achieved total revenue of 2,843 billion yuan in 4Q23, or -21.51% year-on-year; realized net profit to mother - 188 million yuan. Actual repayment performance was not weak. 4Q23 and 1Q24 cumulative sales revenue increased by 13.04%, and 4Q23 and 1Q24 cumulative operating income +△ contract liabilities also increased 11.03%, reflecting steady actual repayment collection performance.
Gross margin remained stable in '23, increasing investment in market expenses. Gross margin increased 0.64pct yoy to 75.25% in '23, while net profit margin was -0.91pct yoy to 30.24%. Revenue from premium alcohol and regular alcohol was +8.82%/+20.70%, respectively. Among them, the gross margin of ordinary wine improved markedly, and the gross margin of medium to high-end alcohol remained stable. In terms of the cost ratio, the 23-year sales expense ratio was +2.38pct to 16.26%. It is estimated mainly due to delayed settlement of digital reform expenses, increased investment in free promotions, etc., and the 23-year management expense ratio is -1.09pct to 6.19% year over year. 1Q24 gross margin was -0.56 to 76.03% year on year, net profit margin was -1.07pct to 37.25% year on year, and sales expenses ratio was +1.11pct to 8.52% year over year. It is expected to mainly result from increased market investment during the Spring Festival season. Management expenses are -1.22 to 2.96% year over year, and are expected to mainly benefit from scale effects.
The basic market is stable, and the dividend rate has increased. The company's basic market is stable, and the product system is gradually being sorted out and improved. Sea Blue and Sky Blue has a nationalization foundation. Through regional decline within and outside the province, it can still have a certain growth potential, and the fundamentals are bottom-line. According to this annual report, the company expects a dividend of 4.66 yuan (before tax) per share, with a dividend rate of 70%, which is a marked increase from the previous five years of dividend rate of about 60%. Corresponding to the current dividend rate of 4.9%, the investment cost ratio is becoming prominent.
Profit forecasting and investment advice: Maintain a “buy” rating. Considering the intensification of competition in Jiangsu Province and the demand for market expenses according to the product split in the company's annual report, we adjusted the profit forecast. We expect revenue for 2024-2026 to be 359, 387, and 41.5 billion yuan (the original value in 2024-2025 was 403 and 45.8 billion yuan), respectively, an increase of 8%, 8%, and 7%; net profit attributable to mother is expected to be 109, 118, and 12.8 billion yuan respectively (the original value in 2024-2025 was 13.5 billion yuan, 15.4 billion yuan), corresponding to the same increase of 9%, and 8% The 2024-2026 EPS is 7.23, 7.85, and 8.50 yuan respectively (the original value is 8.94 and 10.24 yuan in 2024-2025), and the corresponding PE is 13, 12, and 11X, respectively.
Risk warning: macroeconomic uncertainty, increased market competition, risk of repeated epidemics.