Performance summary: 1) 2023: Achieved revenue of 11.300 billion yuan/yoy +48.3%, net profit of 2,666 billion yuan/yoy +142.25%, net profit of 2,469 billion yuan/yoy +39.86% after deducting non-return to mother net profit of 2,469 billion yuan/yoy +39.86%, cash dividend of 1,097 billion yuan, and dividend ratio of 40.99%. 2) 1Q24: Achieved revenue of 2,681 billion yuan/yoy +26.42%, net profit of 713 million yuan/yoy -41.66%, net profit after deducting non-return to mother of 691 million yuan/yoy -36.03%, a year-on-year decrease of 729 million yuan in investment income from joint ventures and a year-on-year decrease of 165 million yuan in asset disposal; profit after excluding the above factors increased 95.95% year on year.
As a result of the opening of new markets and rent increases, market operations continue to grow, and the trade service ecosystem is gradually improving. 1) Market operating business revenue of 3,074 billion yuan/yoy +81.16% in 23 years, gross profit margin 71.83% /+28.52pct.
The East New Energy Market in District 2 added 131,000 square meters of construction area, and added more than 650 new commercial spaces on the 1st to 3rd floors. Of these, the 3rd floor completed the investment promotion in December. In addition, rents for maturing positions in the market have been adjusted, with an average increase of 5.5%. The growth rate is expected to be no less than 5% over the next three years. 2) The trade services business had 23 years' revenue of 602 million yuan/yoy +43.37%, gross profit margin of 69.74% /+22.48pct. By the end of '23, the ① CG platform had uploaded more than 10 million products, GMV had exceeded 65 billion yuan in '23, completed the launch in 6 countries including Spain, Saudi Arabia, and Colombia, and exhibited 700,000 products from 32,000 operators. The operating entity Big Data Company achieved net profit of 81 million yuan in '23. ② Yiwupay has opened more than 20,000 RMB accounts and added more than 8.5 billion yuan in cross-border RMB payment transactions, covering 150 countries and regions on five continents. In 24Q1, Chinagoods achieved GMV of 11 billion yuan/yoy +37.5%, and Yiwupay achieved cross-border transactions of 6.2 billion yuan. 3) The revenue of supporting services in 23 years was 467 million yuan/yoy +79.30%, with a gross profit margin of 23.58% /+6.88pct. Among them, the revenue of the hotel business (including commissioned hotels) exceeded 400 million yuan, a record high. 4) Commodity sales business with 23 yearly revenue of 6.792 billion yuan/yoy +37.22%, gross profit margin 0.50% /+0.22pct.
Profitability has increased significantly, and expense rates have remained stable. In 2023, gross profit margin was 26.50% /+1.61pct, 24Q1 gross margin was 39.05% /+8.02pct, +13.97pct month-on-month. In terms of rates, 24Q1 sales/management/R&D/finance expenses were 1.33%/3.79%/0.21%/0.93%, respectively, with a year-on-year change of +0.21/-1.35/-0.06/-1.05pct.
Investment in AI technology continues to advance, and data assets are being monetized at an accelerated pace. ① Increased investment in AI technology: In recent years, the company has continued to invest 130 million yuan in digitalization and data resources-related fields, reached 18 million yuan in 2023, and continued to expand investment in 24 years. The intangible assets of data resources confirmed at the end of the 24Q1 quarter exceeded 8 million yuan, and the annual investment is expected to exceed 50 million yuan. 17,000 people have experienced and used AI series products in depth on the CG platform. Within 3 months of use by merchants, the average number of inquiries increased by more than 30%, and the number of orders increased by more than 15%. ② Accelerated monetization of data assets: Yiwupay provides merchants with an underlying financing and credit model based on payment data, which is uniformly packaged and exported by credit reporting companies to banks and other financial institutions to charge corresponding service fees. The credit reporting company was established in July 2014 and currently covers 1.08 million legal entities, totaling more than 164 million pieces of data. Currently, there are more than 30,000 credit grantees, and the total amount of credit granted has reached 9.93 billion yuan.
Investment advice: Yiwu's export market was booming in 2014. In January-January, Yiwu's total import and export value increased 47.3% year on year; of these, exports increased by 41.0% year on year. Yiwu exports have the advantage of scale and perfect supporting facilities. The cost and efficiency of enterprise exports are continuously optimized, and the operation of the small commodity city market continues to improve.
Furthermore, based on online platforms, payment and logistics services built on the offline market, the company improves the export trade service ecosystem, empowers merchants to go overseas, and at the same time accumulates data assets to generate various monetization methods, forming a positive feedback effect. Combined with the “Belt and Road” trend, we have long been optimistic about the company's growth. We expect net profit to be 27.56/31.46/3,987 billion yuan in 24-26, up 3.0%/14.2%/26.7% year-on-year, corresponding to PE Wei 17/15/12X, maintaining the “recommended” rating.
Risk warning: Overseas demand falls short of expectations, changes in international trade policies.