Incident: The company disclosed its quarterly report for the year 24, showing excellent revenue and profit performance: 24Q1 achieved revenue of 18.807 billion yuan/YoY -9.45%, +12.6% month-on-month; net profit to mother +0.25% YoY, +53.0% month-on-month, net profit to mother 12.3% /YoY +1.2pct, +3.2pct month-on-month, minus 2.299 billion yuan/YoY +0.15% month-on-month, +57.4% month-on-month.
On the revenue side, short-term sales in the Hainan sector are under pressure, and port stores have recovered or exceeded expectations. According to Haikou Customs, in 24Q1, the amount of duty-free shopping on the outlying islands of Hainan is 12.76 billion yuan/ -24.3%, and the customer unit price is 5983 yuan/ -20.7%. Affected by factors such as crackdown on purchasing, weak spending power, and outbound travel diversion, the outlying islands duty-free sales are under pressure. We expect the China Free Hainan sector to contribute 10+ billion yuan in revenue, down 20+% year over year; other sectors are expected to contribute about 30 billion yuan or +20% year-on-year; other sectors are expected to contribute about 30+ billion yuan in revenue, accounting for a steady increase in revenue ratio Mainly from port stores Contributed by successive restorations.
On the gross profit side, the narrowing impact of the exchange rate and optimization of the revenue structure led to a year-on-year improvement in gross margin. The 24Q1 gross profit margin was 33.3% /year over year +4.3pct, and +1.3pct month-on-month. 1) Since 23H2, fluctuations in the RMB exchange rate have decreased, and the exchange rate has been affected or narrowed; 2) the traditional peak sales season in January-January combined with the resumption of international passenger flights, and the share of duty-free business has increased or increased (the gross margin gap of tax-free and taxable businesses reached 24% in '23); 3) The discount rate has narrowed year-on-year, which also contributed to gross margin.
Expense rates have increased, inventory management has been optimized, and income tax rates have improved. 1) The sales rate was 12.84%/+3.0 pct year over year, and the absolute amount was close to flat. We expect rent and other expenses from opening more port stores to be the main reason; the management rate is 2.53%/+0.4 pct year over year, the absolute amount is basically the same as the previous period; the financial rate is -0.66%/+0.8 pct year on year, 23Q1 narrows to -125 million yuan due to the company's financial expenses of -310 million yuan on exchange. 2) Asset impairment losses of 146 million yuan/year over year, -8.8% month-on-month. The impact of backlog inventory gradually decreased, and inventory fell further from 21.11 billion yuan in 23Q4 to 17.6 billion yuan. 3) The income tax rate was 16.3%, -5.6pct year on year. The past tax rate fluctuated greatly seasonally. Q1 was basically close to the full year level of 23 (16.0%).
Profit forecast and investment suggestions: 1) With the resumption of outbound travel and the implementation of new airport rental contracts, the revenue and profit flexibility of port duty-free shops is impressive, and is expected to be an important source of performance exceeding expectations in 24; 2) There is still room for improvement in profitability: in '23, the company was greatly affected by the exchange rate, the discount was less stable, and the credit policy was revised in June. The combined impact of the increase in the proportion of duty-free sales and revenue structure improvements is expected. Combined with the company's continuous cost reduction, profit margin improvement can be expected; 3) If the market's expectations on spending power change and customs closure policy changes, profit margin improvements can be expected; 3) If the market's expectations on spending power change and customs closure policy changes, profit margin improvements can be expected; 3) If the market's expectations on spending power change and customs closure policy changes, profit margin improvements can be expected; 3) If the market's expectations on spending power change and customs closure policy changes, profit margin improvements can be expected; 3) If the market's expectations on spending power change and customs closure policy changes will be beneficial; The consensus is that valuations are expected to gradually rise. The company's 24-26 net profit is expected to be 79.0, 90.3, and 10.26 billion yuan. The closing price on April 23 corresponds to PE 19/16/14 times, respectively, to maintain a “buy” rating.
Risk factors: weak spending power; geopolitical risk; macroeconomic risk; exchange rate risk.