The company's revenue for the first three quarters of 2023 was -42.8%, net profit was -90.4%, and net profit was -90.4%. The company released its three-quarter report: 2023Q1-Q3 achieved revenue of 1,742 billion yuan (-42.8%) and net profit of 74 million yuan (-90.4%); 2023Q3 achieved revenue of 500 million yuan (-47.8%) and net profit of 0.21 million yuan (-89.3%).
Considering the impact of pressure on diamond category consumption, we lowered the company's profit forecast. We expect the net profit of the mother in 2023-2025 to be 1.11 (-8.00) /3.01 (-7.67) /4.81 (-7.51) billion yuan, corresponding to EPS of 0.28 (-2.00) /0.75 (-1.92) /1.20 (-1.88) yuan. The current stock price corresponding to PE is 111.8/41.3/25.8 times. We believe that the company will continue to build DR into a leading brand in the diamond ring field based on “expression of love” To consolidate core competitiveness, future performance is expected to gradually recover, valuations are reasonable, and “buy” ratings are maintained.
The company's business performance is under pressure due to weakening demand for the diamond category, but expenses have been relatively rigid since 2023. Affected by the weakening consumer demand for the diamond category, the company's operating performance has been under pressure. By business, online self-operation/offline direct-operation/offline joint ventures achieved revenue of 1.7/1,42/140 million yuan in the first three quarters, respectively, -44.3%/-42.4%/-38.2% year-on-year. In terms of profitability, the gross margin of the company in 2023Q1-Q3/2023Q3 was 69.0%/68.2%, respectively, year-on-year -1.8pct/-2.8pct. In terms of period expenses, the sales/management/finance expense ratio of 2023Q3 company was 54.8%/7.0%/1.1%, respectively, and +11.9pct/+2.2pct/+0.2pct respectively over the previous year. The company has a full direct management model, where revenue has declined and rent, labor and other expenses are relatively rigid, leading to a significant increase in sales expenses.
With “brand upgrading and channel optimization” as the core, actively adjusting business strategies Although the domestic economy is showing a recovery trend, the consumption environment is still under pressure. The diamond inlay market, as one of the optional consumption options, has insufficient demand momentum in the short term. Starting from long-term brand development, in order to maintain healthy cash flow and brand image, the company takes “brand upgrading and channel optimization” as the core, and actively adjusts business strategies: (1) Brand:
Filmed the brand True Love blockbuster “Love Never Changed” in the US to spread the true love culture, launch the true love charity campaign, and make every effort to create a “proposal season” to enhance brand potential; (2) Channel: carry out a comprehensive inventory of existing stores, adjust and optimize channels based on changes in the business district, customer quality matching, brand positioning, etc., and opened/opened 19/-94 new stores in 2023Q1-Q3; (3) Product: Lay out the gold category, integrate the Chinese romance of gold “love over gold” with the brand concept, develop a gold series collection Product “DR Xiaojinxin”.
Risk warning: Diamond category demand is under pressure, competition is intensifying, channel optimization falls short of expectations, brand power is declining, etc.