Event: The company publishes its 2023 annual report.
Performance was in line with expectations, and profits were disrupted by multiple factors. In '23, the company achieved revenue of 1,630 million yuan (+ 6.89%); net profit attributable to mother of 214 million yuan (-4.04%); deducted non-net profit of 178 million yuan (-3.80%). Of these, 23Q4 achieved revenue of 444 million yuan (+4.58%) and net profit to mother of 59 million yuan (-33.21%).
The store exceeded its target, and the pressure for group meals at a single restaurant exceeded expectations. Franchised/direct-run stores/group meals/other businesses achieved revenue of 12.52/0.27/3.30/0.20 billion yuan respectively in '23, +9.95/-16.59/-0.63/ -5.06% year-on-year. Among them, the franchise business opened 1,319 stores, far exceeding the annual target of 1,000 stores. However, the average revenue of a single store declined further to 248,200 yuan, mainly due to loss of customers, reduced number of days of operation, and an increase in the share of foreign investors; group meals accounted for 25% of the original planned revenue, which failed to successfully meet the annual target due to reduced demand from downstream customers. By region, East China/South China/Central China/North China achieved revenue of 13.54/1.20/0.97/0.54 billion yuan respectively, +2.41/ +29.83%/+60.47%/+21.75% year-on-year. While ensuring steady growth in East China, the Waifu region achieved high growth.
Expense ratios remained stable, and gross margin declined slightly. The company's gross profit margin in '23 was 26.35%, -1.36pcts year-on-year. Sales/ management/ R&D expense ratios were 5.64/7.28/ 0.74% respectively, -0.08/+0.04/+0.23pcts year-on-year, and remained stable overall. Net profit margin 13.21%, -1.21pcts year over year.
Big and small logic, vast space and plenty of potential. In the short term, along with the recovery of the economy and consumption power, single-store revenue and group meal business are expected to recover quarterly, compounding the annual goal of opening 1,000 stores and the expansion of channels such as group meal preparation, and the performance is expected to enter the fast track of growth. In the long run, the company's acquisition of 51% of Nanjing Steamed Quanwei Company's shares accelerated expansion, with a monetary capital of 1.1 billion yuan. It is expected that the industry leader will enjoy the dividends and accelerated development possibilities brought by industry integration.
Profit forecast: Considering positive store openings and mitigation of external disturbances, we expect 24-26 revenue of $18.96/21.35/$2,389 million, respectively, and net profit of $231/2.64 billion (excluding changes in fair value), respectively, to maintain the buying rating.
Risk warning: The number of stores opened fell short of expectations, single-store revenue continued to decline, demand for group meals plummeted, etc.