Report summary:
Incidents:
Chongqing Department Store released its 2023 annual report. In 2023, the company achieved revenue of 18.985 billion yuan/ +3.72%, net profit of 1,315 billion yuan/ +48.84%, net profit after deducting non-return to mother of 1,129 million yuan/ +41.73%, and non-recurring profit and loss of 186 million yuan, mainly from the disposal of illiquid assets and profit and loss from changes in fair value. Q4 In a single quarter, the company achieved revenue of 4.207 billion yuan/ +10.81%, net profit attributable to mother of 177 million yuan/ +308.29%, after deducting net profit of 59 million yuan/ -17.30%.
It is proposed to distribute a cash dividend of $13.56 (tax included) for every 10 shares.
Comment:
The electrical and automobile trade sector is gaining strength, and the growth resilience of the Chongqing region remains strong. In 2023, the company achieved revenue of 18.985 billion yuan/ +3.72%, by industry: 1) department store revenue of 2,015 million/accounting for 10.61%/+8.81%; 2) supermarket revenue of 6.183 billion/ accounting for 32.57%/-5.51%; 3) electrical appliances revenue of 2,927 million/accounting for 15.42%/+19.52%; 4) Auto trade revenue of 6.083 billion/ accounting for 32.04%/+13.18%; 5) Other revenue of 358 million/accounting for 1.89%/-32.81%; 6) Other Business revenue of 1,419 million, accounting for 7.47%/-8.56%. By region: 1) Chongqing revenue of 17.231 billion/ accounting for 90.76%/+5.24%; 2) Sichuan revenue of 292 million/accounting for 1.54%/-11.52%; 3) Guizhou region's revenue of 5.69 million/accounting for 0.03%/-28.63%; 4) Hubei region's revenue of 37 million/accounting for 0.20%/-7.21%; 5) Other business revenue of 1,419 million/accounting for 7.47%/-8.56%. The company achieved revenue growth only in the Chongqing region. The leading position in the region is stable, and the surrounding area is still in the expansion phase.
Expenses have been properly controlled, and the fee rate has been reduced. In 2023, the company's expense ratio was 19.59% /-2.08pct, of which: 1) sales expenses of 2,611 million/ -7.48%, the sales expense ratio was 13.75% /-1.67pct, mainly due to a decrease in operator remuneration and rental expenses; 2) management expenses of 959 million/ -2.18%, and management expense ratio of 5.05% /-0.30pct, due to a decrease in expenses such as managers' remuneration and depreciation; 3) R&D expenses of 0.27 million/ -6.90%, R&D expenses ratio 0.14% /-0.02pct; 4) Financial expenses 123 million/ -9.06%, financial expenses ratio 0.65%/-0.09pct.
Investment advice: The company is a leading retail enterprise in Chongqing. It has obvious brand advantages and location advantages. After absorbing and merging the Chongqing Trading Group, it is expected to further improve operational efficiency and enhance competitiveness. Revenue for 2024-2026 is estimated to be 19.828 billion/ 20.611 billion/ 21,418 billion, respectively, and net profit to mother will be 1,439 million/1,569 billion/ 1,679 billion, respectively. The corresponding PE is 8 times, 8 times, 7 times, respectively. Maintain a “buy” rating.
Risk warning: Competition in the industry intensifies; store expansion falls short of expectations; performance forecasts and valuation judgments fall short of expectations.