Event: The company released its report for the third quarter of 2023. In the single quarter of 23Q3, the company achieved revenue of 500 million yuan/ -47.77%, net profit of 121 million yuan/ -89.31%, net profit of net income of up to 21 million yuan/ -89.31%, after deducting net profit of 18 million yuan/ -112.68%. 23Q1-3 achieved revenue of 1,742 million yuan/ -42.75%, net profit of 74 million yuan/ -90.40%, net profit of net income of 74 million yuan/ -90.40%, net profit of non-retracted net profit of 68 million yuan/ -110.66%.
Revenue performance has fluctuated, mainly due to insufficient momentum in diamond consumption in the first three quarters. In the first three quarters of 2023, there was structural differentiation within the jewelry industry, market competition intensified, the overall development trend of gold jewelry was good, and consumer demand for diamond-set jewelry was insufficient. The company faced great pressure and challenges under a fully self-operated sales model and mainly diamond-inlaid jewelry.
The company's fee control situation was generally stable in the first half of the year, and the fee rate increased slightly. 23Q3 The company's sales/management/R&D/financial expenses ratio was 54.80%/6.99%/1.12%/1.14%, a year-on-year change of +11.89pct/+2.17pct/+0.85pct/-0.17pct. The sales/management/R&D/finance expense ratio of 23Q1-3 company was 55.56%/6.40%/1.15%/1.04%, a year-on-year change of +20.14pct/+2.40pct/+0.76pct/+0.64pct. In addition, there was a slight increase in R&D expenses due to the company's increased product design innovation and informatization construction.
The company has both online and offline channels to expand the marketing network and facilitate joint marketing. From January to September 2023, the company's online self-operated, offline direct management, and offline joint ventures achieved operating income of 17 million yuan, 142 million yuan, and 014 million yuan respectively, down 44.25%, 42.44%, and 38.21% from the same period last year; other businesses achieved revenue of 3.944,400 million yuan, down 86.93% from the same period last year, mainly due to a decrease in the disposal of processed products.
Stores continue to optimize their layout, focus on quality improvement, close inefficient stores, and lay out high-potential shopping malls.
During the reporting period, the company actively adjusted its channel strategy, focused on improving the quality of store operations and improving profitability, and actively adjusted stores with low potential energy. From January to September 2023, the company continued to adjust and optimize channels. In the first three quarters, a total of 19 new stores were opened, a total of 113 stores were closed, and a net decrease of 94 stores. As of the end of the reporting period, the number of company stores was 594, all of which were self-operated stores. The two overseas stores are located in Paris, France and Hong Kong, China, respectively; domestic stores are mainly located in third-tier cities and above. Among them, there are 374 stores in Tier 1 and 2 cities, accounting for about 63.18%, and 218 stores in Tier 3 cities and below, accounting for about 36.82%.
Investment suggestions: The company is expected to achieve net profit of 1.2/122/290 million yuan in 2023-2025, an increase of -83.0%/0.6%/132.8% over the previous year. The PE corresponding to the current stock price PE is 104.3/103.7/44.5 times, covering the first time, and giving it an “increase in holdings” rating.
Risk warning: Macroeconomic fluctuations, consumption recovery falls short of expectations; company expansion falls short of expectations.