The company's 1Q2024 revenue decreased by 1.30% year on year, and net profit to mother decreased by 28.34% year on year

On April 26, the company announced its 2024 quarterly report: 1Q2024 achieved operating income of 3.340 billion yuan, a year-on-year decrease of 1.30%, and realized net profit of 149 million yuan, converted to fully diluted EPS of 0.13 yuan, a year-on-year decrease of 28.34%, and realized net profit deducted from non-mother of 127 million yuan, a year-on-year decrease of 26.07%. The 1Q2023 company closed Yichun Tianhong Shopping Center to confirm asset disposal proceeds and other related expenses, affecting 1Q2023 net profit of about 64 million yuan.

The company's 1Q2024 comprehensive gross margin decreased by 0.11 percentage points, and the cost ratio decreased by 0.87 percentage points during the period 1Q2024. The company's comprehensive gross margin was 36.95%, down 0.11 percentage points from the previous year.

The 1Q2024 company's expense ratio for the period was 31.09%, down 0.87 percentage points year on year. Among them, sales/management/finance/R&D expenses were 27.21%/3.00%/0.30%/0.59%, respectively, with a year-on-year change of +0.05/+0.31/-1.22/0.00 percentage points, respectively.

Actively carrying out various marketing activities, the digital industrialization business progressed smoothly. By the end of the first quarter of 2024, the company had entered 34 cities in 7 provinces/cities in Guangdong, Jiangxi, Hunan, Fujian, Jiangsu, Zhejiang and Beijing, operating 41 shopping malls (including 4 franchisees), 59 department stores (including 1 franchise), 112 supermarkets (including 25 independent supermarkets), and a total area of over 4.55 million square meters.

On the business side, 1Q2024 seizes important holidays such as the Spring Festival, Lantern Festival, and Women's Day to carry out various marketing activities. Through omnichannel and multi-format efforts, 1Q2024 achieved sales of 9.88 billion yuan, an increase of 1.1% over the previous year.

The shopping mall business continues to promote transformation and upgrading, adapting to new consumer demand and changes in trends, and comprehensively improving operational capacity. Among them, the profitability of the shopping center business continued to improve, and the total profit of comparable stores in the 1Q2024 shopping center increased 120% year-on-year; the supermarket business actively promoted internal changes, accelerated supply chain optimization and adjustment, and strengthened refined operations, and the results were gradually showing. In terms of digital industrialization business, 1Q2024 Technology's subsidiary, Lingzhi Mathematics has signed new contracts with a number of major customers, obtained 3 patent authorizations for inventions, and submitted 2 new patents under review.

Lower profit forecasts and maintain “buy” ratings

The company's performance fell short of our previous expectations, mainly due to the relative pressure on the company's supermarket business. Given the intense competition in the offline retail industry and there is still some uncertainty about the supermarket optimization and adjustment effects, we lowered our 2024/2025/2026 EPS forecast by 25%/27% to 0.16/0.17/0.18 yuan. The company actively carries out various marketing activities, revises and optimizes offline stores. The digital industrialization business is progressing smoothly and maintains a “buy” rating.

Risk warning: Some store leases cannot be renewed when they expire, and the pace of new business formats and new store expansion falls short of expectations.