Incident: The company's 2023 revenue was 11.300 billion yuan, +48.30% YoY, net profit to mother was 2,666 billion yuan, +142.25% YoY, net profit not attributable to mother was 2,469 billion yuan, +39.86% YoY. 2023Q4 revenue was 3.394 billion yuan, +161.24% year over year, net profit attributable to mother 360 million yuan (2022Q4 was -515 million yuan), net profit after deducting non-return to mother was 318 million yuan, +56.18% year over year.
The rent increase exceeded expectations, and the rapid promotion of new businesses contributed to an increase. 1) Old business: In 2023, the company's market operating revenue was 3,074 billion yuan, +81.16% compared with the same period last year. Among them, in the old market section, the company made market-based dynamic adjustments to the rent for maturing business positions. The average rent increase in 2023 is 5.5%, and the growth rate is expected to be no less than 5% in the next three years; in the new market section, the east third floor of Zone 2 completed investment in December 2023, adding 131,000 square meters of construction area, and adding more than 650 new commercial spaces on the first to third floors, further expanding the offline market.
2) New business: 2023 trade services revenue of 602 million yuan, +43.37% year-on-year. Among them, the CG platform's annual GMV was 65 billion yuan, or more than 82% over the same period, contributing 81.42 million yuan in annual profit (1.1 million yuan in the same period in 2022). In 2023, the CG platform launched a fourth-party service area and 169 third-party products, opening up monetization space for value-added services; the cross-border transaction volume of ePayment exceeded 8.5 billion yuan, contributing more than 10 million yuan in profit.
Expense rates have declined, and profits from the main business have increased dramatically. In 2023, the company's sales/management/R&D expenses rate was 2.13%/4.95%/0.19%, -0.46/-2.00/-0.04pct year-on-year. The company's investment income (mainly real estate) in joint ventures in 2023 was RMB 1,036 million, and the main business profit was RMB 1,640 million (RMB 109 million for the same period in 2022). The increase was mainly due to one-time rent cuts in 2022 and the expansion of new markets in 2023.
Investment advice: The company's dividend ratio increased to 40.99% in 2023, and plans to continue to increase the dividend ratio for the next three years. Real estate contributions are expected to gradually weaken, the company's profit quality will improve, revitalizing old markets, expanding new markets, and new trade fulfillment businesses will jointly drive subsequent growth, and the transformation logic continues to be implemented. We expect 2024-26 net profit of 24.3/27.1/3.56 billion yuan, corresponding to PE 19.1/17.1/13.0X, to maintain the “increase in holdings” rating.
Risk warning: Chinagoods platform development falls short of expectations; payment business progress falls short of expectations; new business-related talent reserves fall short of expectations; Yiwu market policy advantages reduce risk.