Incident: On April 19, 2024, Wangfujing released its 2023 annual report. In 2023, the company achieved revenue of 12.224 billion yuan, +13.2% year over year; net profit to mother was 709 million yuan, +264.1% year-on-year, in the middle of the forecast range; net profit without return to mother was 636 million yuan, turning a loss into a profit year on year, above the forecast range.
Non-net profit deducted is above the forecast range, and gross profit margin and net profit margin have rebounded markedly. 2023Q4 achieved revenue of 2,959 billion yuan, or +26.8% year over year; net profit to mother turned a year-on-year loss of 0.61 billion yuan, or 53.9% of the same period in 2019, in the middle of the forecast range; net profit after deducting non-return to mother changed the year-on-year loss to 46 million yuan, which is above the forecast range. Due to the relatively rigid cost and cost characteristics of the offline retail business, revenue recovery is driving various financial data positive. Q4 The company's gross margin was 44.0%, +6.3pcts year on year, +4.6pcts; the three rate was 35.1%, -6.0 pcts year on year; net interest rate due to mother was 2.1%, +11.5pcts year on year; net profit margin without return to mother was 1.6%, +12.3 pcts year over year.
The Ole business is driving growth, and the duty-free business continues to climb. By business type, department store/shopping center/ outlet/ supermarket/ specialty store/ duty-free business achieved revenue of 56.09/25.80/20.34/3.75/15.09/187 million yuan respectively, up 6.2%/+7.7%/+32.1%/-18.5%/+16.4% /- (tax exemption was a new business this year), with gross margins of 36.4%/49.4%/68.7%/14.0%/15.0%/19.2%, respectively. The Ole business continues to drive performance growth, and the revenue growth/gross margin is significantly higher than other business formats; Wanning's tax exemption program continues to climb because the relevant revenue recognition was changed from the total amount method to the net amount method based on operating contracts signed with individual suppliers, and the revenue and gross margin of the duty-free business changed compared to the previous period.
It is proposed to repurchase shares of 1-2 billion yuan, with a dividend ratio of 32%. The company plans to use its own capital to repurchase common shares already issued by the company at a price not higher than 17.50 yuan/share (inclusive) to reduce the company's registered capital and repurchase the share amount of 100 to 200 million yuan. The company plans to distribute a cash dividend of 227 million yuan (tax included), with a cash dividend ratio of 32%.
Profit forecast and investment rating: Wangfujing is an established and benchmark department store retail group with a national chain. After receiving full duty-free licenses, the Wanning Outlying Islands duty-free project “Wangfujing Duty Free Port” was put into operation to create a characteristic duty-free business. Against the backdrop of a rapid recovery in travel and consumption, duty-free shopping on the outlying islands is expected to continue to expand. In the future, duty-free shops in the city will expand imagination, and the company's revenue and profit prospects will improve. Based on the downhill period of the new project, which dragged down performance, and adjusted Wangfujing's 2024/2025 and additional 2026 profit forecasts, the net profit returned to mother for 2024-2026 was 8.54/10.04/1,153 billion yuan, respectively (the previous value of 2024/2025 was 1.90/1,416 billion yuan), and the corresponding PE valuation was 17/14/12 times, maintaining the “gain” rating.
Risk warning: risk of macroeconomic fluctuations, risk of duty-free project performance falling short of expectations, risk of increased market competition