Guoquan: Continuously Expanding the Business Scale While Enhancing Profitability

HONG KONG, Mar 29, 2024 – (ACN Newswire) – Guoquan Food (Shanghai) Co., Ltd. (“Guoquan” or “the Company”; Stock Code: 2517.HK) is pleased to announce the consolidated results of the Company and its subsidiaries for the year ended December 31, 2023 (the “Reporting Period”).

In 2023, the Chinese economy showed a sustained recovery and steady improvement. Despite the challenges, which posed threats to consumer-oriented enterprises, Guoquan responded by effectively managing the supply chain and enhancing operational efficiency, thereby bolstering the profitability. During the Reporting Period, Guoquan recorded the revenue of RMB6,094.1 million, the gross profit of approximately RMB1,350.9 million, reflecting an 8.2% year-on-year growth, and the gross profit margin of approximately 22.2%, improving 4.8 percentage points from 17.4% in the same period of 2022. Furthermore, Guoquan achieved the net profit of approximately RMB263.4 million, representing an increase of 9.3% compared to the same period in 2022. The adjusted net profit reached approximately RMB318.0 million, marking a year-on-year increase of 23.8%. Besides, the operating cash flow represents a year-on-year increase of 137.7% to reach RMB678.3 million.

On November 2, 2023, Guoquan was listed on the Main Board of the Hong Kong Stock Exchange, marking a new milestone in the development. Starting from March 4, 2024, Guoquan officially accessed to the Hong Kong Stock Connect, which is expected to enhance the liquidity of the Company’s stock and gradually highlight its investment value. Additionally, to better reward shareholders, the board of directors proposed the payment of final cash dividend of RMB 0.0521 per share (inclusive of tax), with an estimated total distribution of RMB 143 million, demonstrating Guoquan’s emphasis on shareholder interests.

Expansion of offline stores and acceleration of online channels

In terms of channels, Guoquan has established a nationwide store network to occupy market share. During the Reporting Period, Guoquan’s store network expanded despite the sluggish consumption trend. As of the end of 2023, Guoquan had 10,307 retail stores, covering 31 provinces, autonomous regions, and municipalities, a net increase of 1,086 in the number of stores compared to the end of 2022, further expanding the market influence.

Meanwhile, to empower franchisees and facilitate the sales growth as well as further our consumer reach and offer more flexible shopping experience, we have established multiple online channels, including Guoquan APP, WeChat mini-program, third-party food delivery platforms, Douyin and other popular social commerce platforms. In 2023, through multi-level Douyin accounts for live streaming of Guoquan products or posting related short videos, the total views exceeded 6 billion times.

By establishing close online and offline connections and interactions with consumers, Guoquan achieved a record high number of members, with the top-up amount increasing by 18% annually to approximately RMB720 million. As of the end of 2023, Guoquan had approximately 27.9 million registered members.

Continuous Enrichment of product matrix and digital intelligence driving product innovation

Guoquan has provided offered diversified, tasty, convenient and affordable home meal products in a one-stop shop manner for consumers across a wide range of dining scenarios. With deep consumer insights and R&D efforts, Guoquan has collaborated closely with suppliers and R&D centers to consistently improve its range of products to align with evolving consumer demands and preferences.

In regards to product development, Guoquan leveraged digital tools to analyze consumer behavior, gained in-depth insights into consumers, accurately assessed market trends, and launched new products and upgraded existing ones accordingly. Guoquan also regularly introduced products tailored to local markets to cater to different consumer preferences across regions. In 2023, Guoquan successfully launched a total of 339 new SKUs.

As of December 31, 2023, Guoquan’s product portfolio comprises eight categories including hotpot products, barbecue products, beverages, solo-dining meals, ready-to-cook meal kits, fresh produce, western cuisines and snacks, covering diverse dining needs of consumers comprehensively.

In 2023, the gross profit margin of Guoquan was approximately 22.2%, representing an increase of 4.8 percentage points as compared to 17.4% in the corresponding period in 2022. This improvement was mainly attributable to better cost control resulting from Guoquan’s advantageous scale, along with the development of new products, upgrading of existing products, and the increased proportion of self-production following the acquisition of factories.

Steadily advancing the “three-sphere integrated” development strategy to solidify market leadership

Looking ahead, Guoquan will maintain its commitment to the three-sphere integrated development strategy encompassing brand, product, and channel. This includes expanding product categories, strengthening omni-channel sales network, increasing investments in brand building and marketing, and exploring consumer scenarios to improve consumer value and further solidify the market leadership. Furthermore, Guoquan aims to leverage digital tools to empower both upstream supply chain and downstream franchisees, with the goal of tasty, convenient and affordable home meal products to a diverse consumer base across various channels and scenarios.

Specifically, in terms of channel construction, Guoquan will continue to expand and deepen our omni-channel sales network to further our direct reach to consumers. Strengthen the depth and breadth of the offline store network by deepening offline market penetration in regions already covered, expanding the store network to new regions and by various store types. Further develop our online sales platforms to realize mutual empowerment of offline and online, driving the increase of sales revenue. Moreover, Guoquan will continue to cultivate more entrepreneurial franchisees by encouraging our existing franchisees to open more franchised stores, and propel their sales growth and cultivate entrepreneurial franchisees by continuously expanding to more product categories, upgrading our product portfolio, and developing more online leads.

Guoquan have created a diversified product portfolio in terms of both product categories as well as the consumption scenarios it serves, and in the future, Guoquan will continue to explore campsite dining as a new consumption scenario, explore sales channels for enterprise customers and strengthen the regionalised supply chain of home meal products, so as to provide a wider range of regionalised meal products to cater to consumer needs.

In terms of products, Guoquan will continue to enhance our R&D capability and continue to collaborate with upstream suppliers to improve our R&D and innovation capability. Meanwhile, further integrate Guoquan’s upstream resources and source quality food ingredients through investment in or partnerships with selective and qualified Chinese and overseas food suppliers who have market potential and can achieve synergy with Guoquan, so as to reinforce Guoquan’s core competitive edges.

In terms of digitization, Guoquan will continue to enhance digitization by further improving its procurement and fulfilment management platforms and promoting the development of its membership system, with a view to improving its overall operational efficiency and boosting the growth of sales revenue.

In terms of brand building, Guoquan will increase its investment in brand building and marketing by stepping up its marketing efforts in high-profile TV advertisement, offline advertisement, community group buy and social e-commerce platforms in order to further deepen consumer reach and raise consumer stickiness, thereby elevating brand recognition, brand awareness, brand reputation and consumer loyalty.

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