24Q1: The company achieved revenue of 690 million yuan/yoy +28.0%; net profit to mother of 66 million yuan/yoy -8.8%; deducted non-net profit of 64 million yuan/yoy +5.3%. On a month-on-month basis, 24Q1 revenue/deduction of non-net profit was about 30 million lower than 23Q4. We believe that the higher revenue performance in 23Q4 was mainly due to post-pandemic banquet reimbursement, and the marginal net interest rate for this portion of incremental revenue was higher.

Revenue side: The same store's revenue increased 6.21% in the first quarter, and newly opened stores added 86.09 million yuan in revenue. The increase in revenue was mainly due to newly opened stores.

Cost side: 1) In the first quarter of 2024, the investment in marketing, digital construction, etc. increased by about 4.5 million compared to the same period last year. 2) The company's cash wealth management revenue decreased by 1,827,900 yuan compared to the same period last year; the company added bank loan funds and increased interest expenses of 3.4633 million yuan in 24Q1, which affected the total profit of 5.2912 million yuan. 3) In the first quarter, the company opened three new large-scale stores, including: two Fumao (a Gaoxin Fumao store area of 65,000 square meters and a Fumao store area of 86,000 square meters in Feixi) and one restaurant store (a store area of 22,000 square meters in Baoneng, Wuxi). Due to the one-time investment in starting a new store and expenses such as asset depreciation and amortization, the new store's operating income was in a climbing period, causing the new store to lose 3.65 million yuan in 24Q1.

If the above expenses are added back (a total of 0.13 million yuan), Q1 deducts non-net profit of about 78 million yuan/yoy +26.2%, and the corresponding net interest rate of about 11.1% is the same as 23Q1.

Year 23: The company's annual revenue was 2.40 billion yuan/yoy +43.8%; net profit to mother was 300 million yuan/yoy +224.9%; deducted non-net profit of 250 million yuan/yoy +240.0%. 23Q4 revenue was 720 million yuan/yoy +69.7%; net profit to mother was 100 million yuan/yoy +1648.7%; deducted non-net profit of 90 million yuan/yoy +3576%.

Performance by business: Restaurant expansion accelerates, food grows rapidly

Catering: The revenue of the catering and lodging business in '23 was 1.96 billion yuan/yoy +41.0%, and the gross profit margin was 20.8% /yoy+9.3pct.

As of the end of '23, there were 53 restaurants in Tongqinglou and 4 Fumo Hotels. In '23, the restaurant business opened 6 new stores, including 4 restaurant stores and 2 wedding and banquet stores. In '23, the company renovated 9 old restaurants. In '23, the Hotel Division opened 2 new hotels (Beicheng Fumao, Fuyang Fumao) and prepared 3 hotels (Gaoxin Fumao, Feixi Fumao, Shanghai).

Food: In 2023, food achieved operating income of 167 million yuan/yoy +78.3%, gross profit margin 35.7% /yoy+5.1 pct.

The company has successfully cultivated 3 major 10-million-grade items: stinky mandarin fish, Xiaolong soup buns, and big meat buns. It has entered leading retail channel stores such as Fat Donglai, Costco, and Hema. Furthermore, the Tongqinglou Fresh Meat Big Bag Chain has opened 80 stores and is about to open 60.

Cost ratio: 23 years, the company's gross profit margin was 26.6% /yoy+8.3pct; sales expense ratio 4.8% /yoy+0.9pct; management expense ratio 6.1% /yoy-0.8pct; R&D expense ratio remained flat at 0.1% /yoy. The cost rate of various costs is well controlled.

Profit forecast and investment advice: Optimistic about the immediate characteristics and stable profitability of banquets and catering, as well as the differentiated advantages of the company's standardization and cost performance ratio, the company's net profit for 24-26 is estimated to be 3.3/4.3/570 million (taking into account the company's store layout and cost-side changes, the net profit forecast value for the previous 24/25 year was lowered by 36/460 million). The PE corresponding to the current stock price is 22X/17X/13X, respectively, maintaining the “buy” rating.

Risk warning: food safety risk, risk of new store performance falling short of expectations, risk of store expansion falling short of expectations