Incidents:
The company released its 2024 quarterly report. 24Q1 achieved operating income of 4.293 billion yuan, +7.16% year over year, realized net profit of 452 million yuan, +16.78% year over year, and realized net profit of 446 million yuan without return to mother, +16.91% year over year.
24-year target: The company plans to achieve medium to high single-digit revenue growth in 2024.
Key points of investment
Revenue analysis: Volume and price rose sharply in 24Q1, and each region achieved steady growth. The 24Q1 company achieved revenue of 4.293 billion yuan, +7.16% year-on-year. The company's beer business achieved revenue of 4.178 billion yuan, +6.59% year over year, sales volume of 866,800 kiloliters, +5.25% year over year, corresponding to a tonnage price of 4,820 yuan, or +1.28% year over year. We expect the share of revenue mainly from premium alcohol to increase.
1) By price range: 24Q1 premium beer (products with 8 yuan or above) achieved revenue of 2,572 billion yuan, up 0.96 pct to 61.56%; mainstream beer (4-8 yuan products) achieved revenue of 1,520 billion yuan, +3.57% year over year; economical beer (products under 4 yuan) achieved revenue of 86 million yuan, +12.39% year over year.
2) By region: In 24Q1, the northwest region, central district, and southern district achieved revenue of 11.60 billion yuan, 18.09 billion yuan, and 1,209 billion yuan respectively, compared with +3.23%, +7.05%, and +9.32% over the same period last year. The southern district benefited from the rapid growth rate of major city plans and channel expansion.
Profit analysis: The decline in raw material prices combined with the upgrading of the product structure has led to a steady increase in gross margin. 24Q1 achieved net profit of 452 million yuan to mother, +16.78% year-on-year.
1) In terms of cost, the company's 24Q1 ton cost was -3.27% year-on-year. The company's 24Q1 gross margin was 47.90%, +2.74pct year-on-year, mainly due to lower raw material prices and product structure upgrades.
2) In terms of expenses: The 24Q1 company's cost rate was 16.18%, +0.43pct year-on-year. Among them, sales, management, R&D, and financial expense ratios were 13.13%, 3.13%, 0.11%, and -0.19%, respectively, up 0.18, 0.02, 0.07, and 0.15 pct year-on-year, respectively. Taken together, the net profit margin for 24Q1 was 10.53%, +0.87pct year-on-year.
2024 outlook: Mainstream prices will drive growth, and cost improvements can be expected in 24 years. Looking ahead to 2024, we believe:
1) Product portfolio: In 2024, the company's “Yangfan 27” strategy entered a new stage of development “Fast Sailing”. The company enhances the growth of high-end products in its product portfolio and accelerates the growth of categories other than beer. We believe that in the context of beer consumption upgrades, economic products will gradually be upgraded to mainstream products, driving overall revenue growth; 2) channel distribution: the company continues to promote the megacity plan, plans to increase target cities from 91 to about 100 in 2024, and plans to expand channels in various cities to enhance brand power; 3) Cost side: the cancellation of the barley anti-barley policy may directly drive the improvement of raw material costs for beer companies. It is expected that the company's barley procurement costs will drop year on year, and the Foshan production base is expected to be put into operation in 24Q2, and the share of depreciation sales will increase or offset cost dividends;
4) Expense investment: While maintaining the cost rate, the company increases investment efforts and focuses on the cost investment on the brand side.
Investment advice: Chongqing Beer is the vanguard of high-end technology. The “6+6” brand matrix is perfect, and the ability to create large single products is outstanding. As consumption power recovers, costs improve, the “Fast Sailing” strategy accelerates the high-end process, and refined channel adjustments continue to enable growth, the company's growth potential is expected to continue. We predict that the company's revenue from 2024 to 2026 will be 15.696 billion yuan, 16.598 billion yuan, and 17.517 billion yuan respectively, with year-on-year growth rates of 6.0%, 5.7%, and 5.5%, respectively. Net profit to mother was 1,465 billion yuan, 1,584 billion yuan, and 1,695 billion yuan respectively. The year-on-year growth rates were 9.6%, 8.1%, 7.0%, EPS was 3.03, 3.27, and 3.50 yuan respectively. The corresponding PE was 24.5x, 22.6x, and 21.2x, respectively, to maintain “purchases” -B” recommendation.
Risk warning: Increased industry competition, risk of rising raw material costs, food safety issues, consumption recovery falling short of expectations, product structure upgrades falling short of expectations, etc.