Incidents:
The company released its 2023 annual report. In 2023, the company achieved revenue of 12.22 billion yuan/year-on-year increase of 13.2%, net profit to mother of 710 million yuan/year-on-year increase of 264.1%, net profit of 640 million yuan/year-on-year reversal of losses after deducting net profit of 640 million yuan/year on year. 23Q4 achieved revenue of 2.96 billion yuan/26.8% year-on-year increase, net profit to mother was 60 million yuan/year-on-year reversal loss, and net profit after deducting non-return to mother was 50 million yuan/year-on-year reversal of loss. The results fell within the previously forecast range.
The consumer sector is recovering unevenly, and Ole's business is recovering faster
The consumer market recovered moderately in 2023. According to data from the National Bureau of Statistics, social zero increased 7.2% year-on-year for the whole year, of which retail sales of goods increased by 5.8%. The company performed better than the general market, achieving annual revenue of 12.22 billion yuan, up 13.2% year on year, and same store up 11.2% year on year. However, the high increase in customer traffic also reflected the weakness of spending power. In '23, the company received more than 40% year-on-year increase in passenger traffic, which was significantly higher than the revenue growth rate. At the same time, uneven recovery in consumer channels and consumer categories accompanied the whole year. In terms of taxes, the outlet (revenue up 35.1% year on year) and shopping center (revenue up 7.7% year on year) business saw a significant increase. The repair speed was significantly faster than department stores (revenue up 6.2% year over year) and supermarkets (revenue decreased 18.5% year over year); tax exemption achieved revenue of 190 million yuan in the first year, accounting for 1.4% of the company's revenue.
Profitability is rising steadily, and there is still room for improvement in subsidiary performance. The company's gross margin in 2023 was 41.8%, up 3.6 pct year-on-year. Among them, Q1/Q2/Q3/Q4 gross margins were 42.8%/41.0%/39.4%/44.0%, respectively. Furthermore, in 2023, the company's sales expense ratio, management expense ratio, and financial expense ratio were all properly controlled, and there was a year-on-year decline. The net profit margin for the same period was 5.8%, an increase of 4.0 pct over the same period last year. According to subsidiary companies, the performance of important subsidiaries is still on the recovery channel. In 2023, the net profit of Chengdu Wangfujing Department Store/Changsha Wangfujing Department Store/Belmont Hong Kong Ltd. and Beijing Xinyansha Holdings recovered to 56.6%/73.4%/52.3%/87.7% in the same period in 2019, respectively. The recovery in Beijing Daben's business performance was even more significant.
The shares to be repurchased have firm confidence in development. The cash dividend ratio is 32% based on firm confidence in future development prospects and high recognition of the company's long-term value. The company plans to repurchase the company's shares with its own capital of 1-2 billion yuan. At the same time, the company plans to pay a cash dividend of 230 million yuan, with a cash dividend ratio of 32%.
Profit Forecasts, Valuations, and Ratings
Considering that consumption power is still recovering, we expect the company's 2024-26 revenue to be 134.4/145.7/15.37 billion yuan, respectively, with year-on-year growth rates of 9.9%/8.4%/5.5%, net profit to mother of 8.6/10.9/1.28 billion yuan, year-on-year growth rates of 20.5%/27.2%/17.2%, EPS 0.8/1.0/1.1 yuan/share, respectively, and a 3-year CAGR of 21.6%. In view of the company's firm commitment to the development of multiple business formats and the continuous development of the duty-free business, we are optimistic that the company will continue to grow. According to the Segment Valuation Act, the company will be given 25 times PE in 24 years, with a target price of 18.8 yuan, maintaining an “gain” rating.
Risk warning: Economic growth is slowing; consumption recovery falls short of expectations; tax exemption progress falls short of expected risk.