Event: The company released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved revenue of 33.126 billion yuan, an increase of 10.0%, net profit to mother of 10.016 billion yuan, an increase of 6.8%; 2024Q1 achieved revenue of 16.255 billion yuan, an increase of 8%; and net profit to mother of 6.055 billion yuan, an increase of 5%. The company disclosed that its 2024 business plan aims to achieve a 5-10% increase in revenue.
Comment: The performance of 2023 fell short of expectations and plans at the beginning of the year, and 2024Q1 started relatively smoothly. Liquor revenue grew 10.4% in 2023. Among them, the growth rate of medium and high-end liquor was 8.8%/20.7% respectively. It is estimated that the sales volume/tonnage price of liquor decreased by 14.9%/29.8% respectively. It is expected that the share of high-end products such as the Blue Classic Heavenly Dream series will continue to increase. By product, the 2023 Blue Classic series dominates the product volume, Dream > Sea > Sky. In terms of growth rate, Sky > Dream > Sea Blue, the slowest growth rate is expected to be mainly due to the high base after product replacement and upgrade in the previous year, while Sky Blue's leading growth rate is expected to be mainly due to the product's cost performance advantage.
Looking at subregions, growth rates within the province and outside the province were 8.1%/11.9% respectively. Among them, Hunan, Hubei, Jiangxi and other provinces performed well in relatively large markets. The growth rate within the province was pressured by the intensification of competition and the macroeconomic environment. Among them, northern Jiangsu performed better than central Soviet Union, and central Jiangsu was better than southern Jiangsu.
2023Q4 revenue fell 21.5%, mainly due to the company controlling the pace of shipments during the off-season. 2024Q1 revenue increased 8%, in line with channel feedback. Combined with channel feedback, the Q1 repayment schedule is expected to be around 50%, and the performance in the first quarter lays the foundation for year-round growth. With cost investment, Crystal Dream is expected to achieve more than double digit growth, Dream 6+ in the province gradually recovers, and Haitian's performance is relatively stable. The company's target revenue for this year increased by 5-10%, and the pace of completion of Q1 is basically the same as the annual target. It is expected that in the future, driven by the low base effect and recovery in demand, the product structure is expected to continue to be optimized, focusing on the main products, and the completion target for the whole year is more certain, and the subsequent quarter will be more relaxed.
Profitability is generally stable, and there is still room for advance payments. The company's gross profit margin in 2023 was 75.3%, +0.7pct year on year, mainly driven by the increase in tonnage price; the tax and additional rate was 15.9%, +1.3 pct; the sales/management/R&D/finance expenses ratio was 16.3%/0.9%/-2.3%, and +2.4pct/-1.1 pct/+0.1pct/-0.2 pct. The increase in sales expenses was mainly due to the competitive market environment and digitalization of leading products. In summary, the net interest rate in 2023 was 30.3%, down pct. 2024Q1's gross profit margin was 76.0%, -0.6 pct year on year, tax and surcharge rate 16.0%, +0.3 pct year on year. Total expenses for the period were -0.4 pct year on year, and the net profit margin for 2024Q1 was 37.2%, -1.2 pct year on year. Considering preparation and payment factors at the end of the Spring Festival, there was a large fluctuation in the single quarter. Looking at the combined two quarters, cash on products sold in 2023Q4+2024Q1 increased by 13.1%, consolidated revenue also increased 2.3%. The cash flow performance was superior to that of the reporting side. The 2024Q1 contract debt was 5.815 billion yuan, a year-on-year decrease of 1.16 billion yuan.
Profit forecast: Considering that the company is still in the adjustment phase, the operating pace is actively slowing down, the 2024-2025 profit forecast was lowered and 2026 added, and the rating was lowered to “gain”. The company's net profit for 2024-2026 is estimated to be 11.005 billion/ 12.374 billion/ 13.965 billion yuan, respectively, +9.87%/+12.44%/+12.86% year-on-year, respectively, and the corresponding PE is 13x/12x/11x, respectively.
Risk warning: demand recovery falls short of expectations, industry policy risks, and the competitive landscape intensifies