Description of the event
2023: The company achieved operating income of 2,401 billion yuan, an increase of 43.76% over the previous year; realized net profit of 304 million yuan, an increase of 224.91% over the previous year.
In the first quarter of 2024, the company achieved operating income of 691 million yuan, an increase of 28.01% over the previous year; realized net profit of 66 million yuan, a year-on-year decrease of 8.84%.
Incident comments
Accelerate the expansion of new stores, transform old stores, and help increase revenue. The company opened 8 new stores in 2023, including 6 restaurants (4 restaurants and 2 wedding banquet stores) and 2 hotel stores, which quickly occupied the new market under the recovery of consumption. On the other hand, the company transformed 9 old restaurants to improve the dining environment and enhance the customer experience; in the first quarter of 2024, the company opened 3 new stores, including 1 restaurant, 2 hotels, and newly opened stores, which helped the company increase significantly in revenue in the first quarter of 2023 and 2024. In terms of store products, wedding and banquet stores have added a variety of different styles of banquet hall products to meet different personal customization needs and improve service and customer acquisition capabilities; restaurant stores have added the traditional Chinese Jiangnan pastry “Tongqing Pastry Group” brand, and the “Qingxiao Guangdong” brand, which specializes in Jiangnan morning tea and Cantonese morning and afternoon tea, has entered the store to enrich the brand SKU and enhance brand competitiveness.
Leveraging the unique advantages of the brand, the food business grew rapidly. In 2023, the company's food business achieved revenue of 167 million yuan, an increase of 78.28% over the previous year. Through the endorsement of the “Tongqinglou” brand, the company's various food businesses grew rapidly. In 2023, sales of “Famous Chef Dumplings” increased 172% year on year, becoming another 10 million grade category of Tongqinglou food; Tongqinglou mooncake gift boxes sold more than 600,000 boxes, up 308% year on year; frozen food also grew rapidly. Tongqinglou Fresh Meat Dumplings and Tongqinglou Chef Delicious sold a total of 97.01 million yuan, an increase of 70% year over year. In addition, the company's food company built channel competitiveness with excellent product strength. In 2023, it entered leading retail channel stores such as Fat Donglai, Costco, and Hema, and the Tongqinglou Fresh Meat Big Bag franchise business grew rapidly. As of the 2023 annual report disclosure date, Tongqinglou Fresh Meat Dabao has opened 80 stores and 60 stores to be opened.
The layout is long-term, and profitability is expected to continue to rise. Under the recovery of the consumer environment, the company achieved remarkable results in a series of measures in 2023. The net interest rate bottomed out and rebounded, rising 7.06 pct to 12.66% year on year. Expense rate control was good during the period, with a slight increase of 0.37 pct to 12.86% year on year. Due to the company's revenue from disposable housing levies and tax deduction policies in the first quarter of 2023, the company's net profit declined year-on-year in the first quarter of 2024. Excluding the above effects, the company's net profit actually increased 5.32% year on year. However, due to the company's drastic increase in marketing and digital construction expenses to save energy for subsequent development, the cost ratio increased by 1.44 pct to 12.18% year on year. Furthermore, the revenue of new stores has yet to climb. The net interest rate is under pressure from the one-time investment in new store start-up expenses, etc., which led to a year-on-year decrease of 3.85pct to the previous year. 9.54%. Subsequently, as new store revenue grows and one-time expenses are diluted, the company's net interest rate is expected to rise rapidly.
Investment suggestions and profit forecasts: Looking ahead to the future market, the company's three-wheel drive strategy has initially taken shape. Relying on restaurants and hotel brands such as Tongqinglou and Fumao, it focuses on social catering and lodging consumption scenarios, and implements the core position of being tasty and not expensive, in line with current consumer mentality, medium- to long-term, store expansion, food business product innovation, etc., which will inject momentum into the company's long-term development. Net profit due to mother for 2024-2026 is estimated to be 386/4.88/586 million yuan, respectively, and PE corresponding to the current stock price is 18X/14X/12X, respectively, maintaining a “buy” rating.
Risk warning
1. Consumption recovery is slow; 2. Business costs are rising; 3. Industry competition is intensifying.