Lao Fengxiang released the 2022 semi-annual report: the income in the first half of 2022 was 33.74 billion yuan, an increase of 6.80 percent over the same period last year; the net profit of returning to the mother was 890 million yuan, down 14.53 percent from the same period last year; and the net profit of non-returning mothers was 895 million yuan, an increase of 10.07 percent over the same period last year. The diluted EPS was 1.70 yuan, the weighted average return on net assets was 9.24%, and the net operating cash flow was 6.389 billion yuan, an increase of 134.51% over the same period last year.
Brief comments and investment suggestions:
1. Revenue has increased steadily and the target for the whole year has been achieved in an orderly manner. 1H22 revenue increased by 6.80% to 33.74 billion yuan, net profit decreased by 14.53% to 890 million yuan, and gross profit margin decreased by 0.13pct to 7.69%. Although the epidemic situation of 1H22 has been repeated, the company co-ordinates various measures and resources to achieve both epidemic prevention and control and resumption of work and city, and strives to achieve the predetermined goals and tasks, of which 53.47% of the board's annual target of 63.099 billion yuan is met by the board of directors, and 51.5% of the board's annual target of 1.728 billion yuan is achieved. The income of Q2 alone was 15.298 billion yuan, an increase of 6.29% over the same period last year, and the net profit of returning home was 484 million yuan, an increase of 23.00% over the same period last year.
(a) Sub-products: 1H22 jewelry revenue increased by 9.15% to 29.237 billion yuan compared with the same period last year, with main business accounting for 86.89%. Under the epidemic, the company paid close attention to epidemic-free areas and opened up wholesale business to reduce the overall impact of the epidemic on the company; gold trading revenue decreased 4.28% to 4.258 billion yuan compared with the same period last year, with main business accounting for 12.65%. Pen income fell 48.13% to 53 million yuan compared with the same period last year, with main business income accounting for 0.16%; handicraft sales revenue decreased 39.19% to 50 million yuan, and main business income accounted for 0.15%; trade circulation income decreased 18.71% to 44 million yuan compared with the same period last year, and main business income accounted for 0.13%.
(B) Sub-region: the main revenue in 1H22 increased by 6.94% to 33.491 billion yuan over the same period last year, accounting for 99.53% of the main business income; overseas sales revenue decreased by 4.44% to 157 million yuan, accounting for 0.47% of the main business income.
During the 2.1H22 period, the expense rate decreased by 0.4pct to 2.29% compared with the same period last year, and the expense rates were continuously optimized. The rate of 1H22 sales expenses decreased by 0.18pct to 1.29% compared with the same period last year; the rate of management expenses decreased by 0.14pct to 0.60%; the rate of R & D expenses decreased by 0.04%, which was basically the same as the same period last year; and the rate of financial expenses decreased by 0.09pct to 0.36% compared with the same period last year, mainly due to the increase in interest income of subsidiaries. There was no significant change in each expense rate, and in the final period, the expense rate decreased by 0.4pct to 2.29% compared with the same period last year.
3.1H22 operating profit decreased 8.72% compared with the same period last year, but 2Q22 operating profit increased by 19.97% compared with the same period last year. The net investment income of 1H22 decreased by 20.9 million yuan to-16.09 million yuan compared with the same period last year, the net income from fair value changes decreased by 65.45 million yuan to-72.09 million yuan, the credit impairment loss decreased by 21.39 million yuan to-4820 yuan, the profit and loss on asset disposal decreased by 2.9 billion yuan to 660,000 yuan, and other income increased by 5973 yuan to 7724 yuan, mainly due to the increase in government subsidies.
In addition, the effective income tax rate increased by 1.49pct to 26.58% compared with the same period last year, and the final net profit was 890 million yuan, down 14.53% from the same period last year. The net profit after deducting non-return increased by 10.07% to 895 million yuan from the same period last year, of which the net profit from Q2 alone increased by 23.00% to 484 million yuan compared with the same period last year. Net profit deducted from non-return increased by 13.04% to 429 million yuan.
4. Business review: (1) layout of national market operation, high-quality development to reduce uncertainty. During the epidemic period, the company took the original goal as the direction, paid close attention to the national market, and actively formulated and implemented the business plan. After resuming work and resuming the market, the company will expand the main line of market development, give full play to its own advantages, and create a high-quality development situation. By the end of June 2022, the company had a total of 5055 national marketing outlets (including 15 overseas banking buildings), a net increase of 110than at the end of last year, of which 188were self-operated banking buildings and outlets (the number of domestic self-operated outlets was 174, a net increase of 3; the number of overseas self-operated outlets was 14, a decrease of 1); 4867 chain stores, a net increase of 108s. Complete industrial chain, large-scale manufacturing capacity, national marketing network layout and other core competitiveness make the company has a strong anti-risk ability.
(2) upgrade the product system and industrial structure and strengthen the competitive advantage. 1H22 Lao Fengxiang (Hainan) Gold Jewelry Fashion and Creative Center has been completed and put into operation, and Lao Fengxiang's independent research and development ability of gold jewelry products has been improved. Shanghai Zhongqian New Retail Technology Co., Ltd. develops IP products with brand culture, takes the city as the footprint to build a national flash store in China, promotes the upgrading of industrial structure, and enriches the product range. Taking the cultural tourism market of praying for blessing in Putuo Mountain as the starting point, Gongmei Free Company has designed and developed 30 original series of precious metals. We believe that the continuous innovation of brands and categories is also the embodiment of the company's professional and technological advantages. The company now has 8 state-level arts and crafts masters and 16 municipal arts and crafts masters in Shanghai. The number of middle and senior talents is in the lead in the industry.
(3) implement the comprehensive reform plan of "double hundred actions" and timely promote the project of converting B shares into H shares. In March, the company launched the third batch of eight professional managers, and the selection and signing work is expected to be completed in the second half of the year. The company will summarize and improve the management model, improve the assessment, incentive and evaluation mechanism, and further promote the professional manager system to form replicable experience. At the same time, the company will promote the adjustment and optimization of the ownership structure of enterprises such as Shanghai Gongmei auction House and Shanghai Lao Fengxiang Enamel Art Co., Ltd., and timely promote the B-share to H-share project according to the actual market situation and the company's development strategy. We believe that with the acceleration of the market-oriented management mechanism of the manager system, the company's operational vitality will be further released.
Maintain judgment of the company. We believe that the company, as a leading domestic gold jewelry enterprise with both historical details, scale channels and brand value, has a sound operation as a whole, accelerates the expansion of the market, and the "double hundred Action" further stimulates the endogenous power. continuous mechanism innovation is worth looking forward to.
Adjust the profit forecast. It is estimated that the company's income in 2022-2024 will be 63.1 billion yuan, 71.4 billion yuan and 80.9 billion yuan, up 7.5%, 13.2% and 13.3% over the same period last year; the net profit returned to the mother is 1.74 billion yuan, 2.03 billion yuan and 2.38 billion yuan, down 7.3%, 16.8% and 17.0% respectively, and the corresponding diluted EPS is 3.33,3.88 yuan and 4.54 yuan respectively. With reference to the average PE of major gold and jewelry companies in 2022, and considering the premium of Lao Fengxiang as the A-share leader, the company is given 12-15 times PE in 2022, corresponding to a reasonable value range of 39.91-49.88 yuan, maintaining a "better than the market" rating.
Risk tips: gold price and exchange rate volatility risk, market downturn and overcapacity risk, inventory management risk.
