Incident Overview
In 2023, the company achieved revenue of 2,830 billion yuan, a year-on-year net profit of 548 million yuan, a year-on-year net profit of -47.77%, and net profit without return to mother of 538 million yuan, or -48.85% year-on-year. Among them, 23Q4 revenue was 687 million yuan, +21.7% year on year, net profit to mother was 69 million yuan, -10.1% year on year, and net profit after deducting non-return to mother was 66 million yuan, -16% year over year.
24Q1 achieved revenue of 494 million yuan, or -48.80% year on year, net profit attributable to mother of 73 million yuan, -75.56% year on year, net profit without return to mother of 70 million yuan, or -76.75% year on year.
Analytical judgment:
Cost reforms continue to advance, putting pressure on short-term operations
In 2023, facing a weak cycle in the industry and the pressure of squeezing development, the company actively sought change, solidly promoted strategic transformation, and made every effort to promote the joint transformation to BC, using cost reform as a starting point. The transformation initially showed results, but the short-term transformation put some pressure on operations, causing the company's revenue to decline year on year.
By product, the company's internal sales, alcohol, and Xiangquan/other series of revenue were 7.15/16.47/0.71/388 million yuan, respectively, compared to -38.12%/-27.45%/-68.03%/-0.15%, respectively. Although export revenue growth is under pressure, the company continues to focus on the creation of large individual products of 52-degree ginseng wine and red tan wine, and the province focuses on building display outlets and banquet activities in the Hunan market. Number of code scans on bottles The increase was 70%, and the number of banquets increased by 40%.
At a regional level, the company implemented a strategy of building granaries within the province and building confidence in model markets outside the province; established a Hunan division to strengthen intensive cultivation and omni-channel coverage within the province, focusing on key core prefecture-level cities. The county-level market coverage rate for alcoholic brands reached 95%, and the county-level market coverage rate within the province reached 89%; and model market development outside the province continued to advance. The company continues to expand its dealer coverage. It has achieved 97% coverage of the national provincial market and 73% coverage of the municipal market. A total of 1,381 dealers have been signed, 393 specialty stores have been signed, and the construction of core terminals has exceeded 30,000.
24Q1 continues to firmly push forward the transformation of its marketing model, restore and stabilize the prices of its main products, and repair channel profits and confidence. Market expansion and sales data all reflect positive product sales performance, but it still takes time for partners to adapt to the new model, and customers are cautious in repayment, causing Q1 revenue to remain under pressure, down 48.8% year on year.
Painful period of reform, weak profitability
On the cost side, the company's gross margin fell 1.29pct year on year to 78.3% in 2023, and the decline in gross margin is expected to be affected by product restructuring. On the cost side, the company's sales/management/R&D/ finance expenses rates were 32.2%/5.9%/0.6%/-3.6%, respectively. Cost side companies insisted on cost reform, and consumer marketing expenses increased 10% compared to last year, making the sales expenses ratio increase a lot year over year, but the number of corresponding effective terminals increased by 19% year on year, and the number of banquets increased by 41% year on year, driving a rapid increase in market activity and sales. Taken together, 2023 is still a painful period of cost reform, and the cost and cost sides are still under pressure. Annual profit fell 47.8%, and the corresponding net interest rate fell 6.5 pct to 19.4%.
24Q1 structure-side high-end price new products are in the market introduction stage. Volkswagen's price-side series products were affected by production capacity. The structural adjustment caused gross margin to drop 10.5 pct to 71.1% year on year; the cost side sales/management/R&D/finance cost ratios were 34.01%/7.89%/0.40%/-9.72%, respectively, +8/+4.27+0.30/ -4.64pct, continuing the pace of cost investment last year, and the cost rate increased a lot; overall, Q1 profitability continued to be under pressure, and the net interest rate declined year-on-year 16.3pct to 14.9%, and the corresponding net profit to mother fell 75.6% year over year to 73 million yuan.
Short-term adjustments make energy for higher quality development, and gradual restoration can be expected
In 24 years, the company has steadfastly promoted marketing transformation and continued to transform terminal construction effects into customer repayment effects, which is expected to form a positive BC linkage market cycle; it also continues to focus on penetrating the Hunan base market and model markets outside the province to accelerate the development and construction of core customers and terminals. The number of high-quality core terminals continues to increase, which is expected to create stable sales growth; cooperate with the company to continuously optimize the product value chain, enhance customer profit levels, and gradually promote healthy repayment. Looking at the company in the long run, the company has strong certainty. The 1,000 yuan price band outside the province participates in nurture+gradually stabilizes within the province+central enterprise management and export brands. We judge that the company's competitiveness continues to strengthen, and we are optimistic about the company's long-term high-quality development.
Investment advice
Referring to the latest performance report, we lowered the company's 24-25 forecast of 35.82/4.637 billion yuan to 28.86/3.175 billion yuan, adding a 26-year forecast of 3.492 billion yuan; lowered the 24-25 EPS forecast of 2.66/3.58 yuan to 1.74/2.02 yuan, adding a 26-year forecast of 2.33 yuan; corresponding to the closing price of 56.2 yuan on May 9, 2024, the valuation was 32/28/24 times, respectively, maintaining the purchase rating.
Risk warning
Marketing fell short of expectations, the fee reform process fell short of expectations, and industry competition intensified in January '21. The company and financial director were issued a regulatory letter by the Shenzhen Stock Exchange