Incident: The company released the 2024 annual report and the 2024 quarterly report. In 2023, it achieved operating income of 7.26 billion yuan (+9.6%), achieved net profit of 340 million yuan (+46.6%), and realized net profit of 400 million yuan (+54.5%) after deduction; 2024Q1 achieved operating income of 1.7 billion yuan (-7%), and achieved net profit of 170 million yuan (+20%). Additionally, the company plans to distribute a cash dividend of RMB 5.00 (tax included) for every 10 shares to all shareholders.
Adjust store opening strategies, focus on intensive cultivation, and improve individual stores. In 2023, marinated food sales and franchisee management achieved revenue of 6.05 billion yuan (+7.1%) and 80 billion yuan (+11.4%) respectively; 2024Q1 marinated food sales and franchisee management achieved revenue of 1.41 billion yuan (-9.1%) and 0.2 billion yuan (-15.5%) respectively. 1) In terms of number of stores, by the end of 2023, the number of stores reached 16,000, a net increase of 874 for the whole year. 23H2 adjusted the store structure and slowed down the pace of store opening. 2) In terms of single-store revenue, the average single-store revenue for the whole year was basically the same.
In 2024, the company's store opening strategy will shift to intensive cultivation and improving single stores to ensure the quality of life and profit level of franchisees.
Costs have gradually improved, and return on investment has lowered the level of profitability. 1. In 2023, 2024Q1 gross margins were 24.8% (-0.8pp) and 30% (+5.7pp), respectively, and gradually improved on the cost side starting in 23Q3. 2. The sales expense ratio and management expense ratio in 2023 were 7.4% (-2.3pp) and 6.4% (-1.4pp), respectively; the 2024Q1 sales expense ratio and management fee ratio were 7.9% (+1.1pp) and 6.3% (flat), respectively, and online channel expenses increased. 3. Investment income in 2023 - 120 million yuan, reducing overall profit, net interest rate 4.4% (+1.4pp); 2024Q1 net interest rate 9.4% (+2.2pp).
Epitaxial investment expands the growth curve, and the repurchase of shares shows confidence. 1. Through networked capital, the company invests in epitaxial equity investments around braised dishes, specialty condiments, light restaurants, etc., explores the second and third growth curves, and is committed to building a food ecosystem. 2. Starting in August 2023, the company will use its own capital of 2-3 billion yuan to buy back the company's shares at a price of no more than 50 yuan/share within 12 months to reduce the registered capital, demonstrating the company's confidence in its future development.
Profit forecasting and investment advice. The estimated net profit for 2024-2026 will be 780 million yuan, 940 million yuan, and 1.0 billion yuan, respectively, and EPS will be 1.26 yuan, 1.52 yuan, and 1.62 yuan respectively, corresponding to dynamic PE of 17 times, 14 times, and 13 times, respectively. The 2024 PE will be given 20 times, corresponding to the target price of 25.20 yuan, maintaining the “buy” rating.
Risk warning: raw material prices may fluctuate greatly; food safety risks; industry competition exacerbates risks.