The company released its 2023 annual report and 2024 quarterly report on April 17. In 2023, the company achieved revenue of 11.3 billion yuan, an increase of 48.30%; net profit to mother was 2,676 billion yuan, an increase of 142% year on year, after deducting non-net profit of 2,469 billion yuan, an increase of 39.86% year on year. Diluted EPS of 0.49 yuan, weighted average return on net assets of 16.06%. Net operating cash flow was $1,845 million, up 31.78% year over year.
1Q2024 achieved revenue of 2.68 billion yuan, an increase of 26.42% year on year; net profit to mother of 713 million yuan decreased by 41.66% year on year, after deducting non-net profit of 691 million yuan, a year-on-year decrease of 36.03%. Diluted EPS of 0.13 yuan, weighted average return on net assets of 3.95%. Net operating cash flow of $180 million.
The company announced the 2023 dividend plan. For every 10 shares, a cash dividend of 2 yuan (tax included) will be distributed, for a total of 1,097 billion yuan, with a cash dividend ratio of 40.99%.
At the same time, the company announced that it will jointly invest 1 billion yuan in overseas funds with Shanghai Botong, the Investment Fund to attract trade in services innovation and development guidance funds, the Land and Sea Fund, Jinhua City Investment, etc., to form a two-wheel drive with Zhijie Yuangang. The company plans to invest 250 million yuan, accounting for 25%.
Brief review and investment advice.
1. Revenue in 2023 was 11.3 billion yuan, up 48.30% year on year, mainly due to the opening of the East New Energy Products Market in District 2, rent cuts in the previous year, and the year-on-year increase in product sales. The annual gross margin increased 11.18 pct year over year to 26.50%. 1Q2024 revenue of 2.68 billion yuan increased 26.42% year over year, and gross margin increased 8.02 pct year over year to 39.05%.
By industry, market operating revenue in 2023 increased 81.16% to 3,074 billion yuan, gross margin increased by 28.52 pcts to 71.83%; trade services revenue increased 43.37% to 602 million yuan, gross margin increased 22.48 pcts to 69.74%; ancillary services revenue increased 79.30% to 467 million yuan, gross margin increased 6.88pcts to 23.58%; product sales revenue increased 37.22% to 6.792 billion yuan, and gross margin increased 0.22pct to 0.50%;
2. The cost rate for the 2023 period was 8.38%, a year-on-year decrease of 3.35pct. Among them, the sales expense ratio decreased by 0.47 pct to 2.13% year on year; the management expense ratio decreased by 2 pct to 4.95% year on year; the financial cost ratio decreased by 0.85 pct to 1.11% year on year; and the R&D expense ratio decreased by 0.04 pct to 0.19% year on year. The cost rate during 1Q2024 was 6.26%, a year-on-year decrease of 2.25pct. Among them, the sales expense ratio increased by 0.21 pct to 1.33% year on year; the management expense ratio decreased by 1.35 pct to 3.79% year on year; the financial cost ratio decreased by 1.05 pct to 0.93% year on year; and the R&D expense ratio decreased by 0.06 pct to 0.21% year on year.
3. Net profit to mother in 2023 was 2,676 billion yuan, up 142% year on year. Investment income from joint ventures and joint ventures (real estate subsidiaries) was 1.04 billion yuan, estimated net profit of the main business of 1.52 billion yuan. Net profit from 1Q was 713 million yuan, down 41.66% year on year. Of this, investment income from joint ventures and joint ventures was 0.3 billion yuan. The estimated net profit of the main business after excluding investment income and asset disposal profit and loss (after tax) was 680 million yuan, an increase of 102% year on year.
4. Market business: ① Dynamic rent adjustment. The company has constructed a differentiated pricing model for commercial rents. According to the pricing model, rents for expiring business positions in the market were adjusted at the end of 23, and rents increased by an average of 5.5%. The growth rate is expected to be no less than 5% for the next three years. ② The third floor east of Zone 2 completed investment promotion in December 2023, and the offline market was further expanded.
5. Chinagoods platform: ① In '23, GMV exceeded 65 billion yuan, net profit of 81.42 million yuan, launched the fourth party service platform homepage and service area, launched a total of 169 third-party service products, and cooperated with leading platforms such as 1688, Baidu, and Jingdong to build a fourth-party service platform. ② 1Q24 GMV reached 11 billion yuan, an increase of 37.5%. GMV is expected to exceed 80 billion in 24, and 200 digital service applications will be launched.
5. Yiwu Pay: ① Express Connect obtained the People's Bank of China's “Payment Business License” renewal notice on July 5, 2023, and completed the license renewal process on time. The license is valid for 5 years; on November 1, it was officially approved by the State Administration of Foreign Exchange for foreign exchange business qualifications. ② In '23, the cross-border transaction volume exceeded 8.5 billion yuan, net profit of 16.29 million yuan, and the 1Q24 transaction volume exceeded 6.2 billion yuan.
6. Data elements: In recent years, the company has continued to invest more than 130 million yuan in fields related to digitalization and data resources; in 23 years alone, related investment reached 18 million yuan. In 2024, the company will continue to expand investment related to data elements. At the end of the first quarter, the amount of intangible assets-data resources that the company can confirm will exceed 8 million yuan. The annual investment is expected to exceed 50 million yuan.
Maintain judgment on the company. In 2019, the company proposed the strategy of “using the market as the main business, using numbers as the link, and using the platform as support to build a comprehensive international trade service provider”. Dynamic rent adjustments consolidated the growth logic, and the new business gradually contributed to profits and had plenty of room for monetization. We believe that looking ahead to the next three years, the market business will enter a new cycle of expansion. The profit growth of new businesses under ecosystem resonance is expected to be released nonlinearly, and may further open up valuation space upward.
Update profit forecasts. Net profit due to mother for 2024-2026 is estimated to be RMB 2,981 billion, RMB 3.199 billion, and RMB 4.480 billion, respectively, up 11.4%, 7.3%, and 40.1% year-on-year.
We value offline and online businesses using PE and PGMV methods, respectively. Excluding the net profit of the Chinagoods platform, the offline business was given 16-20 times PE in 2024, corresponding to a reasonable market capitalization range of 34 billion yuan to 424 billion yuan; the online business was given a market value of 80 billion GMV 0.30-0.35 times PGMV in 2024, corresponding to a market value of 24-28 billion yuan. The overall reasonable market value range was 58-70.4 billion yuan, and the reasonable stock price range was 10.57-12.85 yuan per share, maintaining an investment rating of “superior to the market”.
Risk warning: Market expansion falls short of expectations, capital expenditure pressure, new business development falls short of expectations, insufficient talent reserves, and uncertainty in the foreign trade environment.