China Zhongfu 1Q2024 had revenue of 18.81 billion yuan and net profit of 2.31 billion yuan. On April 23, 2024, China Zhongfu (601888.SH) announced the results for the first quarter of 2024:1Q2024's revenue was 18.81 billion yuan, down 9.45% year on year; net profit to mother was 2.31 billion yuan, up 0.25% year on year, corresponding to basic earnings per share of 1.11 yuan; net profit after deducting net profit of 2.30 billion yuan, up 0.15% year on year.
Costs and expenses are well controlled, and tax exemptions on Hainan's outlying islands are under phased pressure
The company's 1Q2024 gross profit margin was 33.31%, up 4.31pct year on year and 1.27pct month-on-month. Thanks to the company's efforts in preferential control and price unification, gross margin increased year-on-month. The company's sales/management expenses ratio for 1Q2024 was 12.84%/2.53%, up 2.98/0.38pct year on year, and 2.01/1.47pct, respectively. The year-on-year increase in the company's sales/management expense ratio is mainly due to the fact that the business was in the initial recovery stage during the same period last year, with expenses related to rent, labor, etc., which led to a slower recovery on the revenue side than on the cost side, and the business was developing normally this year; thanks to the continuous improvement in the company's operating efficiency and the release of operating leverage brought about by business recovery, the company's sales/management expense ratio declined month-on-month, and cost control was good.
In terms of business, the company's various businesses developed steadily in the first quarter. During the Spring Festival, the company's CDF Haikou International Duty Free Mall and CDF Sanya International Duty Free City both launched a series of activities to promote duty-free consumption on the outlying islands. Meanwhile, the company opened a Qeelin boutique at Changi Airport in Singapore, further expanding its port business. In addition, at the 4th China International Consumer Goods Fair held from 2024.4.13-2024.4.18, the company participated deeply and set up a 600-square-meter booth in the main exhibition hall to display various categories such as beauty, alcohol, watches and jewelry to show consumer trends and trends. At the same time, CDF Haikou International Duty Free also set up an exhibition area for new free consumption scenarios to promote consumption upgrading.
On April 18, 2024, Haikou Customs announced the duty-free shopping situation on the outlying islands of Hainan from January to March 2024:
1Q2024 The amount of duty-free shopping on Hainan's outlying islands was 12.76 billion yuan, down 24.5% year on year; the number of duty-free shoppers was 2.13 million, down 4.6% year on year; the number of duty-free shopping items was 13.22 million, down 32.8% year on year.
Against the backdrop of the relative pressure of tax exemptions on the outlying islands in 1Q2024, the company continued to strengthen its operating capacity, and its performance was relatively steady.
Maintain profit forecasts and maintain “buy” ratings
The company's quarterly report data is basically in line with the performance report data. We maintain the forecast for the company's 2024/2025/2026 net profit of 72.3/86.8/9.95 billion yuan, corresponding to EPS of 3.49/4.20/4.81 yuan. Looking ahead, as port tax exemptions continue to resume and enter 2Q2024, the impact of the high base due to the crackdown on purchasing agents disappears, and the company's performance is expected to improve further month-on-month and maintain a “buy” rating.
Risk warning: Consumption recovery is falling short of expectations, and progress of new projects falls short of expectations.