Event: Commodity City released its 2023 annual report and 2024Q1 financial report. The company's 2023 revenue was 11.3 billion yuan/ +48.3%, and net profit to mother was 2,676 billion yuan/ +142.3%. 24Q1 revenue was 2,681 million/ +26.42%, net profit attributable to mother was 713 million yuan/ -41.66%, and 24Q1 profit after excluding investment income and asset disposal income increased 95.95% year over year.
Breakdown of core contributions:
① Market operation: Revenue of 3,074 billion yuan/ +81.2% in 23 years. Market expansion & store price increases are expected to continue to contribute to revenue and profit growth. In '22, the company cut rents and fees for merchants, and negative factors were eliminated in '23; leases for stores on the east 1-2 floors of District 2 were implemented at the end of '22; at the end of '23, the company adjusted rent for maturing stores, and rents rose by an average of 5.5%. The growth rate is expected to be no less than 5% over the next 3 years; the construction of global digital trade centers accelerated, which is expected to boost future performance.
② Trade services: 23 years' revenue of 602 million/ +43.4%, Chinagoods' rapid penetration brought revenue growth. The GMV of the CG platform exceeded 65 billion/ +82% in 23; currently, the company has cross-border foreign+cross-border RMB qualifications, and the cross-border settlement capital has exceeded RMB 8.5 billion in 23, providing a solid foundation for the platform ecosystem.
③ Supporting services: 23 years' revenue of 467 million/ +79.3%. The increase in hotel occupancy rates after the pandemic, combined with the expansion of the exhibition business scale, led to sector growth.
④ Product sales: 23 years' revenue of 6.792 billion/ +37.22%. The gross margin of this business is low, but it is significant for opening up the trade ecosystem.
Future incremental contributions:
① AI: The company continues to develop a forward-looking layout in the AI field, empowering AI startups through a series of closed loop products that empower the digital trade ecosystem, and the Chinagoods AI smart innovation service platform. In the process, AI digital trade infrastructure construction continues to advance, with the “Belt and Road” international data center project as hardware support, and hardware+software service platforms are being built simultaneously.
It is expected that the company's AI application will achieve multi-dimensional monetization in the Yiwu trade ecosystem.
② Data elements: Backed by national data element related policies, it is estimated that the amount of intangible assets-data resources that 24Q1 can confirm will exceed 8 million yuan, and is expected to invest or exceed 50 million yuan and deposit corresponding data assets throughout the year 24. At present, the company has successfully verified data related to the Yiwu Index, and is continuously accumulating trade data and high-value application products. We expect that with the accumulation of data elements, it will increase the company's profit statement.
Dividend situation: A cash dividend of 0.20 yuan is expected per share, and the dividend payment ratio is 40.99%, the highest level since 2016.
Profit forecast and valuation: Since the beginning of the year, trade along the Belt and Road has continued to prosper. Yiwu has benefited from high export prosperity. Under the gradually improving platform ecology, the company's main market business has benefited from steady growth brought about by new market launches and store price increases, while trade services, supporting services, AI, data elements and other businesses will achieve multiple monetization based on Yiwu's prosperous ecosystem. The overall forecast is that the company's net profit from 2024-2025 is 3.25/3,568 billion yuan, corresponding to the current 15x/13xPE rating.
Risk warning: store price increases fall short of expectations, store expansion falls short of expectations, exports fall short of expectations