The company recently released its 2023 annual report and 2024 quarterly report. It achieved operating income of 83.27 billion yuan for the full year of 23, +12.6% year over year; net profit to mother of 30.21 billion yuan, +13.2% year over year. 24Q1 achieved operating income of 34.83 billion yuan, +11.9% year-on-year; realized net profit of 14.05 billion yuan, or +12.0% year-on-year. The company pays a cash dividend of 46.7 yuan (tax included) to all shareholders for every 10 shares, with a cash dividend ratio of 60%.
1618. Low contributions increased, and red envelope rebates led to a slight drop in tonnage prices. By product, Wuliangye achieved revenue of 62.80 billion yuan (yoy +13.5%) in '23, of which sales volume and tonnage price were +18.0% and -3.8%, respectively. Pu 5 is expected to achieve double-digit sales growth. 1618, a low contribution to some of the sales increase, and at the same time, the tonnage price declined year-on-year due to increased promotion and red envelopes. The 23-year wine series achieved revenue of 13.64 billion yuan (yoy +11.6%). In 23H2, Wuliangye achieved revenue of 27.63 billion yuan (yoy +18.2%), and the series wine series achieved revenue of 6.93 billion yuan (yoy +21.8%).
By region, revenue in the East/South/West/North/Central region was +17.9%/-9.0%/+21.7%/-4.0%/+16.3%, respectively. Large base regions grew faster, and growth in weak regions slowed. At the end of '23, the number of distributors in the East/South/West/North/Central region was +54/+17/+29/+15/+23 at the end of 23H1, respectively, and continued to increase investment efforts. At the end of 24Q1, the company's contract debt was 5.05 billion yuan, down 8.8% year on year and 26.5% month on month.
The gross profit margin and expense ratio are stable, and the profit level is stable. In '23, the company's gross margin was 75.8% (yoy+0.4pct), sales expenses ratio was 9.4% (yoy+0.1pct), management expenses ratio was 4.0% (yoy-0.2pct), and net sales margin was 37.9% (yoy+0.0pct). In 24Q1, the company's gross margin was 78.4% (yoy+0.0pct), the sales/management expense ratios were +0.8pct/-0.5pct year-on-year, respectively, and the net sales margin was 42.0% (yoy-0.1pct).
General Five Control raised prices, and 1618 accelerated growth. In 24, the company continued its double-digit revenue growth target and is expected to increase its contribution mainly through products such as 1618, 39 degrees, 45 degrees, and 68 degrees; among them, product policies such as 1618 have invested heavily, and 1618 is expected to accelerate growth. The company reduced the 20% quota for Pu 5 dealers and at the same time cooperated with the price increase policy, which is beneficial to Pu Five Control to raise prices, maintain market order, and benefit long-term development.
According to the annual report for '23, there was a slight increase in revenue and gross profit margin for 24-25. We forecast the company's earnings per share for 2024-2026 to be 8.75, 9.88, and 11.07 yuan, respectively (the original forecast was 8.54 and 9.78 yuan for 24-25). Combined with comparable companies, we believe that the current reasonable valuation level of the company is 21 times the price-earnings ratio of 2024, and the corresponding target price is 183.75 yuan, maintaining the purchase rating.
Risk warning: Economic recovery falls short of expectations, weakening channel profits, falling short of expectations, risk of food safety incidents.