The company's 2023 revenue and net profit after deducting non-return to mother were +1.0% and +16.4%, respectively, and +31.8% and +12.5% year-on-year in 24Q1, respectively. The profit side of the gold and printing and dyeing business both grew steadily in '23. The printing and dyeing business is expected to improve its market position and bargaining power in the context of demand recovery and pattern optimization in 24; the gold business will improve the category structure and expand and strengthen. Considering Shang Jinyuan's combined statement, net profit for 24-26 is estimated to be 823 million yuan, 921 million yuan, and 1,011 million yuan respectively. The current market capitalization corresponds to 24PE10X and 25PE9X, maintaining a highly recommended rating.
The volume and price of the gold business rose sharply in 2023, and the Q4 recovery in the printing and dyeing business increased profit margins for the whole year.
1) Revenue & profit: The company achieved annual operating income of 9.666 billion yuan, up 1.00% year on year; net profit to mother of 685 million yuan, up 4.13% year on year; deducted non-net profit of 705 million yuan, up 16.42% year on year. Among them, 23Q4 achieved revenue of 2,332 billion yuan, up 14.44% year on year; net profit to mother of 233 million yuan, up 9.26% year on year; deducted non-net profit of 290 million yuan, up 37.17% year on year.
2) Revenue split: ① The revenue of the printing and dyeing textile industry in 2023 was 3,996 billion yuan (-4.01%), of which sales volume was 1,395 billion meters (+4.26%), and the estimated unit price fell by a high number of units; total profit of 580 million yuan (+1.77%). ② The gold and jewelry industry's revenue was 5.332 billion yuan (+5.70%), of which processing sales volume was 69.74 tons (+2.08%), and the estimated unit price increased by a lower number of units; total profit of 130 million yuan (+14.49%). ③ Electricity production revenue of 905 million yuan (-8.43%). ④ Wholesale revenue of 494 million yuan (-25.03%).
3) Increased profitability: The company's gross margin in 2023 was 13.79%, an increase of 0.68pct year-on-year. Among them, the gross profit margin of printing and dyeing was 21.96% (+1.53pct); the gross profit margin of gold was 4.68% (+0.02pct); and the gross profit margin of electricity production was 22.92% (+6.5pct). The company's net profit margin in 2023 was 8.02%, up 0.24pct year over year.
4) The cost rate increased during the period: in 2023, the company's sales expenses rate was 1.27% (+0.05pct); the management expense ratio was 1.95% (+0.19pct); the R&D expenses rate was 1.91% (-0.06pct); and the financial expenses rate was -0.37% (-0.11pct).
5) Increased number of inventory turnover days: net cash flow from operating activities decreased by 11.88% year on year to 778 million yuan in 2023; the number of inventory turnover days was 72 days, +7 days year on year; the number of accounts receivable turnover days was 11 days, the same as year on year.
In 24Q1, Shang Jinyuan also contributed to performance, reduced the period expense ratio, and increased cash flow and inventory.
1) Revenue & profit: The company achieved revenue of 3.127 billion yuan in 24Q1, an increase of 31.83% over the previous year. Among them, the main printing and dyeing business increased by single digits. Shang Jinyuan's consolidated balance for February to March '24 is estimated at 600 million yuan. Net profit due to mother was 128 million yuan, an increase of 3.64% over the previous year. Among them, the main printing and dyeing industry is expected to grow in the middle to high single digits, and the shipping business lost money. After deducting non-net profit of 128 million yuan, a year-on-year increase of 12.47%.
2) Increased gross margin level: 24Q1 gross margin was 14.86%, up 2.81 pct year on year; net margin was 4.69%, down 1.13 pct year on year.
3) The cost rate decreased during the period: 24Q1 sales expenses rate was 1.04% (+0.06pct), management expenses were 1.69% (-0.34pct), R&D expenses were 1.19% (-0.47pct), and financial expenses rate was -0.01% (+0.19pct).
4) Increased cash flow & inventory turnover days: 24Q1 net cash flow from operating activities increased 21.10% year over year to 184 million yuan; inventory turnover days were 83 days, +15 days year over year; accounts receivable turnover days were 10 days, -1 year over year.
Profit forecast and investment suggestions: The company focuses on strengthening the “textile printing+gold jewelry” dual business and a moderately diversified development strategy, improving the profitability of the main business and actively cultivating new growth points. The printing and dyeing business is expected to improve its market position and bargaining power in the context of demand recovery and pattern optimization in 24; the gold business will improve the category structure and expand and strengthen. Considering the combined impact of Shang Jinyuan, the company's revenue is estimated to be 14.349 billion yuan, 15.747 billion yuan, and 17.071 billion yuan respectively from 2024 to 2026, with year-on-year growth rates of 48%, 10%, and 8% respectively. Net profit attributable to mother was 823 million yuan, 921 million yuan, and 1,011 million yuan respectively, with year-on-year growth rates of 20%, 12%, and 10%, respectively. The current market value corresponds to 24PE10X and 25PE9X, maintaining a highly recommended rating.
Risk warning: risk of large fluctuations in gold prices; risk of terminal consumption falling short of expectations; risk of textile industry order recovery falling short of expectations, etc.