The company released the 2023 annual report and the 2024 quarterly report. After excluding investment income and asset disposal income, the company's main business profit increased 95.95% year-on-year after deducting revenue of 11.30 billion/ +142.3%; 24Q1 revenue of 2.68 billion/+26.4%, net profit due to mother of 710 million/ -41.7%, net profit due to non-mother net profit of 690 million/ -36.0%. The company is a leading wholesaler of small commodities in China. The main market base is stable, and market expansion & rent increases drive continuous growth; the scale and monetization capacity of Chinagoods and payment platforms are expected to grow significantly. Maintain an “Overweight” rating.
The main business performance increased dramatically in 24Q1, and the market rent increase was realized. In 2023, the company achieved revenue of 11.30 billion/ +48.3%, net profit of 2.68 billion yuan/ +142.3%, net profit of not returned to mother; 24Q1 achieved revenue of 2.68 billion/ +26.4%, net profit attributable to mother of 710 million/ -41.7%, net profit of 690 million/ -36.0% after deducting the above factors, mainly due to a decrease of 730 million yuan in investment income in the current quarter compared to the same period last year, and asset disposal decreased by 160 million yuan compared to the same period last year; after excluding the above factors, the main business profit increased by 95.95% year-on-year, with a bright growth rate of 95.95% year-on-year eyes. In addition, at the end of the 2023 reporting period, the company adjusted rents for maturing locations, with an average rent increase of 5.5%. The growth rate is expected to be no less than 5% in the next three years. It is expected that market expansion & rent increases will drive continued growth in the main business.
All businesses achieved impressive growth in 2023, and gross margins increased markedly. In 2023, the company's market operating revenue was 3.07 billion/+81.2%, and gross profit margin was 71.8% /+28.5pct. Trade services revenue 60 million/ +43.4%, gross profit margin 69.7% /+22.5pct. The revenue from ancillary services was 470 million/ +79.3%, and the gross profit margin was 23.6% /+6.9pct, mainly due to the increase in hotel occupancy rates and the expansion of the exhibition business. Product sales revenue was 6.79 billion/+37.2%, and gross margin was 0.5% /+0.2pct. 24Q1 added GMV to the Chinagoods platform reached 11 billion/ +37.5%. Yiwu Pay completed more than 6.2 billion yuan in cross-border transactions in the first quarter.
The gross margin increased, and the cost ratio declined steadily. In 2023, the company's gross margin was 26.5% /+11.2pct, of which financial expenses ratio was 1.1% /-0.9pct; management expenses ratio was 5.0% /-2.0pct; sales expenses ratio was 2.1% /-0.5pct; R&D expenses ratio was 0.2% /-0.0pct. 24Q1 sales expense ratio is 1.3% /+0.2pct, management expense ratio is 3.8% /-1.3pct, R&D expense ratio is 0.2% /-0.1pct, and financial expense ratio is 0.9% /-1.0pct.
Investment advice. Exports are booming in the Yiwu market. The company is a leading domestic small commodity wholesaler. The main market business base is steady, and market expansion & rent increases drive growth. At the same time, the company's Chinagoods platform and payment platform GMV are growing at a high rate, and transaction+payment+logistics strengthen trade services in all aspects. The monetization capacity is expected to continue to improve, and the second growth curve continues to drive growth. The company's net profit for 2024/2025/2026 is estimated to be 25.8/32.8/3.97 billion, respectively, maintaining the “increase in holdings” rating.
Risk warning: Market expansion falls short of expectations, investment returns fluctuate, new business progress falls short of expectations