Key points of investment
Performance summary: In 2023, the company achieved revenue of 19 billion yuan, +3.7% year on year; net profit to mother was 1,315 billion yuan, +48.8% year over year; after deducting items such as profit and loss from changes in fair value, government subsidies, and non-current asset disposal gains and losses, non-net profit was 1.13 billion yuan, +41.7% year over year. The company's return to mother and the deduction of non-net profit are in line with the performance forecast. Corresponding to 2023Q4, the company achieved revenue of 4.2 billion yuan, 10.5% year on year; net profit to mother of 187 million yuan, +330% year over year; deducted non-net profit of 109 million yuan, +52.3% year over year. The company plans to pay a cash dividend of 60 billion yuan, with a cash dividend ratio of 45.63%.
Expense rates have improved, and net profit margins have increased: In 2023, the company's gross margin/net sales margin was 25.7%/7.05%, -0.44/ +2.10pct year-on-year. The sales/management/R&D expenses rate was 13.75%/5.05%/0.14%, -1.67pct/ -0.30pct/ -0.02pct year-on-year. The company vigorously promoted rent reduction, reducing rent by 84.66 million yuan; strictly controlling marketing and energy costs, saving 56.8 million yuan; labor costs have continued to decline since 2019; and joint procurement and independent bidding in the five regions saved 35.35 million yuan in costs.
Look at the main business by sector: light expansion, heavy efficiency improvement.
Department store business, revenue in 2023 was 2.01 billion yuan, +8.8% year on year; gross margin was 66%, +1.74 pct year on year, 52 stores, 2 year-on-year. Department stores have accelerated the light agency and escrow business expansion model. The total number of annual members of the company exceeds 20 million, and the entire business format integrates promotions of 4.15 billion yuan.
Supermarket business, supply chain reform in 2023, revenue of 6.18 billion yuan, -5.5% year on year, gross margin of 17.36%, +1.9 pct year on year; number of stores 152/year over year -10, flat rate of 84 million yuan/year on year +1.3%. Strengthen supply chain reforms, promote 3R prepared dishes, explore the “Century Family” supermarket to join, and remodeled into 20 boutique supermarkets. The development of new businesses is beginning to show results.
In the electrical appliance industry, revenue in 2023 was 2.92 billion yuan, +19.5% year over year, gross margin was 19.8%, -0.06pct year on year. The number of stores was 41, the same as the previous year. Set up Zhongbai Pukang Company to expand e-commerce omni-channel sales, set up specialty stores, extend the front-end market; transform 17 themed stores.
Auto trade, revenue in 2023 was 6.01 billion yuan, +13% year over year; gross margin was 6.2%, -1.1 pct year on year; number of stores was 38, +2 year-on-year. Cooperate with used car platforms to increase business growth; explore one-store multi-brand operations and build multi-brand supermarkets in Wanzhou and Yongchuan.
The consumer finance business will soon grow steadily, contributing to investment income: In 2023, consumer finance will soon achieve net profit of 1,982 million yuan, +11% over the same period; it contributed 615 million yuan of investment income to the company, accounting for 47% of net profit attributable to mother.
Profit forecast and investment rating: The company is undervalued and has a high dividend rating. The company's dividend rate increased from 31% in 2022 to 46% in 2023. As the company transforms its supply chain and operating efficiency, it is expected that profit margins will be further improved; experiments such as retail “six major stores” and “hard discount stores” are expected to open up room for revenue growth. We fine-tuned the company's net profit forecast for 2024-25 from 14.6/16.1 to 14.5/1.59 billion yuan, and added a 2026 forecast of 17.1 billion yuan, an increase of 10.2%/10.0%/7.5% year-on-year. The closing price on April 19 corresponds to 8/7/7 times P/E. Maintain a “buy” rating.
Risk warning: Increased competition in the industry, sluggish demand for terminal consumers, changes in consumer finance operations and policies, there is still uncertainty about the implementation progress of reverse absorption of the Chongqing Trading Company, etc.