Event: In 2023, the company achieved operating revenue/net profit of RMB 101.21/235 million (YoY +16.22%/-35.78%); 2024Q1 achieved operating revenue/net profit to mother of RMB 41.33/130 million yuan (+10.42%/+28.24% YoY).
Famous wine brands from 23 have performed well, and fine wines have continued to grow. The company's liquor revenue in '23 was 9.395 billion yuan, +20.02% year-on-year. From a volume and price perspective, the company's liquor sales volume in 2023 was 8090.15 kiloliters, +7.50% year over year. The corresponding average price was 1161.33 yuan/liter, +11.65% year over year. We expect the average price increase to be driven by an increase in the share of major brands of liquor.
Regional development is generally balanced, and the store 3.0 plan is progressing smoothly. In 2023, the company's East China, South China, Central China, North China, Southwest China, and e-commerce regions contributed 31.97/13.98/13.60/12.33/12.10/848 million yuan respectively (YoY:
+4.24%/+9.07%/+21.94%/+2.86%/+182.81%/+1.31%), regional development is more balanced. In 23 years, the company continued to promote the Store 3.0 Plan and developed 201 Jiahuazhi Liquor Store 3.0 stores. It is expected that in '24, the company will continue to promote the construction of Huazhi Liquor Store 3.0, contributing to revenue growth while optimizing the store structure.
Gross margin is under phased pressure in '23, and profit-side elasticity is expected in '24. The company's gross margin/net margin changed year-on-year in '23, -3.29/ -1.88pcts to 10.75%/2.32%, respectively; sales expense ratio/management expense ratio changed year-on-year to -0.5/+0.01pcts to 6.44%/1.79%, respectively. We expect the decline in the company's gross margin mainly due to the decline in gross profit of some standard products in '23. The sales expense ratio declined in '23. It is expected that the company will mainly drive personnel optimization. The number of sales staff will be reduced from 1928 to 1,350 in '23. 23Q4 The company's operating cash flow was +76.52% year over year to -106 million yuan, and advance payments were 1.792 billion yuan (-34.60%/+12.56% year over year).
Strong distribution standards guarantee scale, enhance the cultivation of fine wines or contribute to profit flexibility for 24 years. We believe that Huazhi Liquor Store 3.0 has continued to expand in '24, which is expected to help sell famous wines and ensure revenue growth. At the same time, according to the official website of Liquor, Wuliangye reduced quotas and strengthened the cultivation of specialty wines such as lotus or contributed to profit growth. Considering the background of a weak recovery in liquor consumption, we lowered our 24-25 profit forecast. We expect the company's revenue to be 111.65/125.35/14.03 billion yuan in 24-26 (115.8/13.44 billion yuan before 24-25), +10.3%/11.7% YoY, and net profit to mother of 2.83/3.45/ 406 million yuan (24-25 years ago: 41/570 million yuan), corresponding to +20.1%/22.2%/17.4% year-on-year PE was 26.7/21.8/18.6X, respectively, maintaining a “buy” rating.
Risk warning: Competition in the industry intensifies; consumer demand for liquor falls short of expectations; promotion of fine wine falls short of expectations; prices in the famous wine market fluctuate; and quotas for famous wine fluctuate.