Description of the event
The company disclosed the 2023 annual report and the 2024 quarterly report: 2023 revenue was 11.30 billion yuan, up 48% year on year, and net profit to mother was 2.68 billion yuan, up 142% year on year. 2024Q1's revenue was 2.68 billion yuan, up 26% year on year, and net profit to mother was 710 million yuan, down 42% year on year.
Incident comments
In 2023, the company further optimized its business structure and promoted business focus around the strategic positioning of “International Trade Comprehensive Service Provider”.
On the revenue side, based on the opening of the East New Energy Product Market in Zone 2, rent reduction in the previous year, and expansion in the scale of product sales, annual revenue achieved a high year-on-year increase. In terms of gross profit contribution by business, market operations represented by store rents and seat selection fees contributed 2.21 billion yuan in gross profit, compared with a compound growth rate of 20% in 2021; trade services business represented by Chinagoods platform membership fees and free payment service fees contributed 420 million yuan in gross profit, an increase of 112% over the previous year. The total amount for the whole year (sales tax+4 fees) was 1.09 billion yuan, which is basically the same as the previous year. Overall, benefiting from Yiwu's high export boom, the company's traditional market business is steadily improving, the company's main business is growing rapidly in emerging trade services, and the optimization of superimposed expenses have jointly promoted annual operating profit (gross profit - operating tax - four fees) to reach 1.90 billion yuan, excluding the impact of annual rent cuts, and a compound increase of 38.2% over the two years. Net investment income for the year was 1.07 billion yuan, mainly from real estate joint ventures or joint ventures. Combined, net profit returned to mother increased by 142% for the whole year.
2024Q1, the company optimized the rent pricing mechanism, and the operating profit of the main business doubled year-on-year. The main reason for the decline in net profit from 2024Q1 is due to the high base of real estate investment income and asset disposal income for the same period last year. Excluding these two effects, the 2024Q1 company's operating profit (gross profit amount - operating tax - four fees) reached 850 million yuan, an increase of 99% over the previous year. The main reason was: 1) Dynamic rent adjustments. At the end of 2023, the average rent increase was 5.5%. It is expected that the growth rate will not be less than 5% in the next three years; 2) Continued trade service business with higher gross margins. Rapid growth. Among them, the 2024Q1 cross-border transaction volume exceeded 6.2 billion yuan (about 1.2 billion US dollars in 2023, about 8.5 billion yuan), contributing channel fees and exchange agency rebates; the Chinagoods platform added GMV of 11 billion yuan in 2024Q1, an increase of 37.5% over the previous year, contributing to value-added service fee revenue.
Increase the dividend ratio and focus on long-term returns. The company's dividend payment rate in 2023 increased from 32% last year to 41%, which is also significantly higher than the historical level. The company plans to continuously increase the proportion of profits distributed in cash within three years from 2024; it also plans to establish and improve the company's long-term incentive and restraint mechanism through equity incentives, etc., demonstrating the company's determination to enhance long-term shareholder returns based on strategic transformation.
Investment advice: Yiwu's export volume in January-February was 102.77 billion yuan, up 41% year-on-year, higher than the national export growth rate of 10.2% in January-January. Yiwu's export and foreign trade continued to be booming. The company's market resource endowments are building strong barriers. Along with strategic transformation, rents are expected to increase steadily year by year, and the trade service business may grow rapidly. At the same time, the digital market part of the global digital trade center is expected to be invested in the third quarter of 2025, which is expected to open up room for long-term growth. Based on this, we expect net profit to be 2.85 billion yuan, 31.2 billion yuan, and 4.02 billion yuan in 2024-2026, corresponding PE valuations of 16.0, 14.6, and 11.3 times, respectively, maintaining the “buy” rating.
Risk warning
1. New project construction or investment fell short of expectations;
2. Overseas demand is weakening, and export trade growth is blocked.