Event: The company released its 2023 Annual Report and 2024 Quarterly Report. In 2023, revenue of 3.26 billion yuan was achieved, +25.9% year-on-year; net profit to mother was 850 million yuan, +55.3% year-on-year. 24Q1 achieved revenue of 800 million yuan, +5.5% year over year; net profit to mother was 170 million yuan, -9.8% year over year.
The quarterly revenue of the pre-mixed cocktail business leveled off, but we are still confident about its future development: the company's revenue in 2023 was 2.88 billion yuan, +27.8% year over year; 24Q1 revenue was 710 million yuan, +5.7% year over year. Looking at the quarterly pace, 23Q3-24Q1's revenue for the three quarters has stabilized at 71-720 million yuan since strong explosive growth in 22Q4 led to a peak quarterly revenue of 860 million yuan. Revenue has not continued to rise due to the impact of the consumer environment, but we believe that there is still plenty of room for a strong future. Currently, it is only at the stage where the first wave of consumers has reached it. The company increased sales expenses in 24Q1, further expanded the strong series of consumers and consumption scenarios, and increased consumer stickiness, which will help drive strong sales growth. Refreshing also updated the packaging this year to differentiate it from minor intoxication. The company continues to build the “358” category matrix, and we are optimistic that the scale of the pre-prepared cocktail business will continue to grow.
Profitability weakened in 24Q1, but we think that expenses are manageable from a full-year perspective: the net interest rate returned to mother in 2023 was 24.8%, +4.7pcts compared to the previous year. Among them, gross margin was +2.9 pcts year over year, and sales expenses ratio was -2.4 pcts year over year. Thanks to strong sales bursts, product structure optimization, and scale effects were evident.
The net profit margin for 24Q1 was 3.6 pcts year-on-year, mainly due to increased sales expenses in a single quarter. The company used the Spring Festival opportunity to increase brand marketing with a strong “dragon can” as a starting point. However, the company also stated that the annual advertising expenses were planned reasonably, optimizing the pace of annual advertising expenses. We believe that a moderate increase in cost investment to boost sales of products such as Qiangshuang is appropriate. At the same time, according to the company's management style, we judge that expenses are still manageable from a year-round perspective.
The volume of whiskey aging has begun to take shape, and the finished wine is ready to go: we are keeping an eye on the progress of the company's whiskey business. The annual report mentioned that “on December 14, 2023, the Laizhou Distillery will officially fill 300,000 aging barrels”, and in 2024, “we will focus on brand incubation and product development for malt whiskey and blended whiskey to ensure that finished whiskey products are launched according to plan.”
Investment advice: Adjust the profit forecast according to the latest performance situation. The estimated revenue for 2024-2026 is $37.8/44.3/5.29 billion yuan, net profit to mother of 9.4/11.4/1.4 billion, and EPS of 0.9/1.09/1.33 yuan.
The 2024/4/30 closing price of 20.4 yuan corresponds to a P/E of 23/19/15 times, respectively. We believe that the pre-prepared cocktail business is stable as a whole, and we expect the whiskey business to open up the company's value space and maintain a “recommended” rating.
Risk warning: Demand falls short of expected risk; market acceptance of new whiskey products falls short of expected risk.