The company released the 2023 Annual Report and the 2024 First Quarter Report. According to the announcement, the company achieved operating income of 2,401 billion yuan in 2023, an increase of 43.76%; net profit to mother and net profit without return to mother increased by 224.91% and 240.03% year-on-year respectively, and annual profit achieved a high year-on-year increase. In the first quarter of 2024, the company's operating income, net profit attributable to mother, and net profit excluding non-return to mother were +28.01%, -8.84%, and +5.32%, respectively. The company's catering+hotel+food three-wheel drive strategy was initially formed, and the business may usher in a period of rapid development. We maintain the company's shareholding rating.
Key points to support ratings
Revenue and profit increased year over year. According to the company's announcement, in 2023, the company achieved operating income of 2,401 billion yuan, a year-on-year increase of 43.76%; net profit to mother was 304 million yuan, an increase of 224.91%; net profit after deducting non-return to mother was 253 million yuan, an increase of 240.03% year-on-year, and achieved a high year-on-year increase in results for the year 23.
In the first quarter of 2024, the company achieved operating income of 691 million yuan, a year-on-year increase of 28.01%; net profit of 658.991 million yuan, a year-on-year decrease of 8.84%; net profit after deducting non-attributable net profit of 64.496 million yuan, an increase of 5.32% over the previous year, due to factors such as partial compensation received last year, one-time investment in new stores, asset depreciation and amortization, and increased investment in marketing and digital expenses. However, according to the company's announcement, profit for the first quarter of '24 was lower than the year-on-year operating income performance, if such factors were excluded, the company did not deduct net net revenue performance. The magnitude or convergence of performance and revenue growth.
The formation of a three-wheel drive strategy is expected to push the company into a period of rapid growth. The company's catering+hotel+food three-wheel drive strategy has begun to bear fruit. The company's catering business continues to expand. While opening new stores and transforming stores, it is also digging deeper into its service advantages in traditional cuisine and wedding banquets. In terms of the hotel business, the full-year performance improved significantly in '23, achieving annual revenue of 445 million yuan, an increase of 140.84% over the previous year.
In terms of the food business, related revenue again reaped high growth in the full year of '23 due to early cultivation and accumulation, achieving annual revenue of 167 million yuan, an increase of 177.77% over the previous year. In addition, 80 fresh meat dabao stores have been opened throughout '23, and 60 are yet to be opened. The related franchise business is expected to grow further.
Store expansion continues to advance. According to the announcement, the company opened 8 new stores in '23, including 6 restaurants and 2 hotel stores, adding 12,2534 square meters of store area. In 2024, the company expects to expand 8-12 restaurants, 4-6 hotels, and increase the store area by 26,4851 square meters.
In the first quarter of '24, the company opened two new Fumao hotels and a restaurant.
valuations
The company's three-wheel drive strategy is beginning to bear fruit, and the performance is expected to enter a period of accelerated growth. Considering that the company may enter a period of rapid growth in performance, the revenue scale may improve, but the opening of a new store may have an impact on profit growth in the short term. We predict that EPS for 24-26 will be 1.47/1.84/2.29 yuan, respectively, and the corresponding price-earnings ratio will be 18.3/14.7/11.8 times, respectively, maintaining an increase in holdings rating.
The main risks faced by ratings
Market competition heightens risks, and there is a risk that subsequent recovery in consumer demand such as food and beverage and store expansion will fall short of expectations.