The company's 2023 revenue decreased 5.47% year on year, and net profit to mother decreased by 40.79% year on April 12. On April 12, the company announced its 2023 annual report: in 2023, it achieved operating income of 30.519 billion yuan, a year-on-year decrease of 5.47%, and realized net profit of 399 million yuan due to fully diluted EPS of 0.22 yuan, a year-on-year decrease of 40.79%, resulting in net profit deducted from non-mother. This was -239 million yuan in the same period last year, turning a loss into a profit. Looking at the single-quarter split, 4Q2023 achieved operating income of 6.960 billion yuan, a year-on-year decrease of 3.06%, and realized net profit of 55 million yuan. This translates into fully diluted EPS of 0.03 yuan, a year-on-year decrease of 93.63%, and realized net profit deducted from non-return to mother of -83 million yuan.

The company's comprehensive gross margin increased by 1.58 percentage points in 2023, and the cost ratio decreased by 0.26 percentage points during the period. The company's comprehensive gross margin in 2023 was 26.54%, up 1.58 percentage points from the previous year. Looking at the single-quarter split, 4Q2023's comprehensive gross margin was 26.60%, down 2.72 percentage points from the previous year.

The company's expense ratio for the 2023 period was 23.87%, down 0.26 percentage points year on year. Among them, sales/management/finance/R&D expenses were 16.52%/7.35%/-0.06%/0.06%, respectively, with year-on-year changes of -0.37/+0.50/-0.41/+0.01 percentage points, respectively. The 4Q2023 company's expense ratio for the period was 26.06%, down 0.37 percentage points year on year. Among them, sales/management/finance/R&D expenses were 17.98%/8.17%/-0.15%/0.06%, respectively, with year-on-year changes of -1.76/ +1.62/ -0.23/+0.002 percentage points, respectively.

Bailian Xijiao Shopping Center opened, and the ReTIS project in another city is progressing smoothly. In terms of key store restructuring, Bailian Xijiao Shopping Center opened on December 16, 2023. It is the company's first “commercial+community” space product named after the “Super Community Energy Field”, which comprehensively upgrades the spatial pattern, flow line, business format and brand. In terms of marketing, in 2023, the company launched art exhibitions, concerts, food festivals, cycling festivals, themed markets, city charity events, etc. in various business formats. By business type, the company's Ole, specialty, and shopping center businesses all recovered well in 2023. In terms of REITs, the company reviewed and approved the Shanghai Youyicheng Shopping Mall public REITs project on July 12, 2023. In January 2024, the relevant application materials were submitted to the China Securities Regulatory Commission and the Shanghai Stock Exchange and officially accepted.

Lower profit forecasts and maintain “buy” ratings

The company's performance fell short of our previous expectations, mainly due to the relative pressure on the company's supermarket business. Considering that competition in the industry may gradually intensify in the future, we lowered our 2024/2025 EPS forecast by 31%/32% to 0.30/ 0.33 yuan, and added 0.35 yuan for the company's 2026 EPS forecast. The company has a strong competitive position and location advantage in Shanghai and other places. It actively carries out various marketing activities, promotes the upgrading and restructuring of key stores, and maintains a “buy” rating.

Risk warning: The recovery process of consumption fell short of expectations, and the operation of shopping malls fell short of expectations after the renovation.