Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 1,469 million yuan, a year-on-year increase of 23.92%, and net profit to mother of -0.2 million yuan. The year-on-year loss narrowed. The company's revenue performance was in line with previous forecasts. 24Q1 achieved operating income of 419 million yuan, a year-on-year decrease of 3.02%, and net profit to mother of 18 million yuan, turning a year-on-year loss into a profit. The company's performance was in line with previous forecasts.
Investment ratings and valuations: Due to the decline in 24Q1 revenue, the 24-25 profit forecast was lowered, and the 26-year profit forecast was added. Net profit for 24-26 was 62 million, 125 million, and 151 million (previous 24-25 was 63 million and 259 million), which increased 103% and 20% year-on-year in 25-26. The PE corresponding to the current stock price is 170x, 81x, and 67x, respectively. Considering that the company is in the reform period, the 24Q1 performance has turned a loss into profit and maintained an increase rating. We believe that after China Resources joined China Resources, the company was reformed and refreshed. The Fuhexiang series focused on major stores such as the core tobacco hotel and the banquet hotel, strengthening the Fuyang base market and the key market in Hefei. The number one seed China Resources enabled the integration of beer and white channels. The results of the company's reform will gradually become apparent in the long run.
The company's alcohol revenue in 2023 was 982 million, up 43.46% year over year. By product, revenue for high-end wine in '23 was 0.53 million; revenue for mid-range liquor was 230 million, down 23.21% year on year, of which sales volume fell 5.71% year on year and tonnage price fell 18.56% year on year; revenue for low-end wine was 699 million, up 81.51% year on year. Among them, sales volume increased 103.18% year on year, and ton price decreased 10.67% year on year. Looking at the subregion, the province's revenue in '23 was 1,199 billion yuan, up 11.43% year on year, accounting for 85.67%, and revenue outside the province was 200 million yuan, up 119.03% year on year, accounting for 14.33%, up 6.49 percentage points. At the end of the reporting period, there were 276 dealers in the province, an increase of 96, a decrease of 35; the number of dealers outside the province was 196, an increase of 135, a decrease of 21.
24Q1's alcohol revenue was 369 million, a year-on-year increase of 32.69%. By product, 24Q1 high-end wine revenue was 0.25 million, up 177.91% year on year; mid-range wine revenue was 83 million, up 214.84% year on year; low end wine revenue was 262 million, up 7.66% year on year. Looking at the subregion, the 24Q1 revenue in the province was 300 million yuan, up 20.95% year on year, accounting for 81.28%, and revenue from outside the province was 69 million yuan, up 129.29% year on year, accounting for an increase of 18.72%, accounting for an increase of 7.89 percentage points.
Net profit margin in 2023 was -1.34%, up 14.35pct year on year. Losses narrowed. The increase in net profit margin was mainly due to higher gross margin, lower sales expenses and management expenses. In 2023, the gross profit margin was 40.32%, up 13.88pct year on year, mainly due to increased sales revenue and cost reduction through lean production and cost control; tax rate 14.59%, up 3.93pct year on year; sales expense ratio was 15.97%, down 4.6 pct year on year, mainly due to a decrease in sales expenses, advertising expenses, and redemption expenses as a share of revenue; management expenses (including R&D expenses) ratio of 10.63%, down 1.45 pct year on year, mainly due to depreciation and amortization as a share of revenue.
The net profit margin for 24Q1 was 4.38%, up 13.74 pct from year to year, turning a loss into a profit. The increase in net margin was mainly due to an increase in gross margin and a decrease in sales expenses. The 24Q1 gross profit margin was 44.52%, up 17.29 pcts year on year. It is expected mainly due to increased sales revenue and cost reduction through lean production and cost control; tax rate 16.04%, up 3.65 pct year on year; sales expense ratio 17.15%, down 1.42 pct year on year; management expenses (including R&D expenses) rate 8.63%, up 2.21 pct year on year.
Net operating cash flow was 89 million in 2023 and -462 million in '22. Of these, cash received from sales of goods and services was 1.03 billion, down 8.1% year on year. Cash flow growth was slower than revenue growth, mainly due to changes in advance accounts. Advance accounts received at the end of '23 million were $122 million, an increase of $11 million over the previous month, and accounts received in advance at the end of '22 were 125 million, an increase of 19 million over the previous month.
Net operating cash flow was -105 million in 24Q1 and -01 million in 23Q1. Of these, 439 million dollars were received in cash from sales of goods and services, a year-on-year decrease of 3.4%. The growth rate of cash flow was slightly slower than the revenue growth rate, mainly due to changes in advance accounts. Advance accounts received at the end of 24Q1 were 126 million, an increase of 0.04 million over the previous month, and 192 million in advance accounts received at the end of 23Q1, an increase of 68 million over the previous month.
The catalyst for stock price performance: Anhui's economic development exceeded expectations; the growth rate of core products exceeded expectations; and the growth rate of net profit exceeded expectations.
Core hypothetical risks: the economic downturn affects demand for liquor; repeated epidemics may lead to the absence of liquor consumption scenarios; food safety incidents.