Revenue and net profit to mother increased 23% and 25% year over year, while 24Q1 increased 18% and 20% year over year. In 2023, the company achieved operating income of 3,536 billion yuan, a year-on-year increase of 22.58%, net profit to mother of 911 million yuan, a year-on-year increase of 25.17%, after deducting non-net profit of 867 million yuan, a year-on-year increase of 29.36%, and EPS of 1.60 yuan. It plans to distribute a cash dividend of 1 yuan (tax included) per share, with a dividend rate of 63%.
The company's net profit margin increased by 0.53 PCT to 25.76% year on year in '23. Looking at the review, the company's performance has continued to be impressive in recent years. The compound annual growth rates of revenue and net profit from 20 to 23 were 15.36% and 22.22%, respectively. On a quarterly basis, 23Q1-Q4 companies' revenue in a single quarter increased by 33.13%, 20.25%, 22.04%, and 12.14%, respectively, and net profit to mother was +41.36%, +40.16%, +22.80%, and -0.88%, respectively. Among them, the slight decline in the profit side in 23Q4 was mainly due to a significant increase in sales expenses ratio of 10.46PCT.
In terms of the first quarterly report, 24Q1 achieved revenue of 1,268 billion yuan, a year-on-year increase of 17.55%, net profit of 362 million yuan, a year-on-year increase of 20.43%. Against the backdrop of weak demand and weather disturbances in the first quarter, the company still achieved ideal growth, and the net profit margin increased 0.68 PCT to 28.55% year on year.
Direct operation/franchise/online revenue was +35%, -2%, and +16%. The total number of stores was +5%. Looking at the channel, the company's direct management, franchise, and online revenue accounted for 68%, 26%, and 6%, respectively. Revenue was +34.55%, -2.07%, and +16.08%, respectively.
In terms of offline stores, as of the end of '23, the company's total number of stores was 1,255 (with 64 new stores opened, +5.37% compared to the number of stores at the beginning of the year), with a total of 607 direct-run stores (+4.84%) and a total of 648 franchised stores (+5.88%). It is estimated that the store efficiency of a single store was +28.35% and -7.51%, respectively; the total area of the company's directly managed and franchised stores was +9.32% and +24.36% respectively. YoY +17.41% and -25.63, respectively %.
Expense ratio increased slightly above gross profit margin, inventory continued to improve, net operating cash flow increased gross profit margin: gross margin increased 1.21PCT to 78.61% year-on-year in '23. On a quarterly basis, gross margins for the single quarter from 23Q1 to 24Q1 were +0.23, +4.11, +1.98, +0.11, and +0.32PCT, respectively. By channel, the gross margins of direct management, franchise, and online channels in '23 were 83.14%, 70.27%, and 70.62%, respectively, compared with +1.04, -0.70, and +7.20PCT, respectively.
Expense rate: The year-on-year increase in the cost ratio was 1.75PCT to 47.66%. Among them, sales, management, R&D, and finance expenses were 37.09% (+1.17PCT), 7.85% (+1.06PCT), 3.51% (+0.04PCT), and -0.78% (-0.51PCT), respectively. Among them, the year-on-year increase in the management fee ratio was mainly due to an increase in employee remuneration, intermediary service fees, and office travel expenses. The year-on-year decrease in the financial expense ratio was mainly due to an increase in interest income on large time deposits. On a quarterly basis, the cost rates for a single quarter from 23Q1 to 24Q1 were -2.30, +1.00, +1.60, +9.81, and +0.91PCT, respectively. Among them, 24Q1 sales, management, R&D, and financial expenses rates were -0.22, +0.13, and -0.22PCT, respectively.
Other financial indicators: 1) Inventory decreased by 5.09% year on year to 708 million yuan at the end of March '24, down 8.86% from the beginning of the year. Inventory turnover days in 23 and 24Q1 were 346 days, 200 days, -42 days, and -40 days, respectively. 2) Accounts receivable increased 28.31% year-on-year to 324 million yuan at the end of March '24, and increased 27.71% from the beginning of March '24. The number of accounts receivable turnover days in 23 and 24Q1 was 29 days, 26 days, -4 days year on year, and +3 days, respectively.
3) Asset impairment losses were 61 million yuan in 23 years, a year-on-year decrease of 38.38%; 24Q1 was 3.94 million yuan, a year-on-year decrease of 80.50%; 4) Net operating cash flow was 1,296 billion yuan in 23, an increase of 37.53% year-on-year, and 7.34% year-on-year increase in 24Q1.
The performance in '23 and 24Q1 is impressive. We expect multi-brand collaborative development to perform well in '23 and 24Q1. Both revenue and profit will achieve rapid and steady growth under fluctuations in the external environment, and indicators such as net interest rates and inventories have also improved. The company began a milestone of internationalization in '23. It completed the acquisition of two international luxury brands CERRUTI 1881 and KENT & CURWEN in April to improve the multi-brand layout. KC Brand 24 Fall/Winter products will be unveiled. At the same time, the company headquarters will establish a new international division and establish a Paris R&D center to build an international team for product design, development and brand operation.
The main brand of Biyinleven continues to create high-quality, high-grade, high-tech products, and continues to focus on the core category of T-shirts. The market share is further increasing, and golf is rapidly gaining strength and seizing the high-end fashion sports market. Channel-side companies have expanded their area, moved their location, and changed their image, actively laid out shopping centers, and introduced member management platforms and refined VIP management, which increased significantly. Furthermore, as of the end of December 2023, the total capital on the company's account was 3.2 billion yuan, which is highly resilient to risks.
We expect the company to continue to make full use of its brand power advantages, deepen product R&D and innovation, expand the channel side steadily, expand stores and improve store efficiency, and promote long-term continuous growth with multiple brands. Considering the uncertainty of terminal demand, we slightly lowered the company's profit forecast for 24-25 (net profit reduced by 3%/4% from the previous profit forecast, respectively) and added a profit forecast for 26 years, corresponding to EPS of 2.02, 2.42, and 2.81 yuan respectively for 24-26, and PE 15 times and 12 times PE for 24 and 25, respectively, maintaining a “buy” rating.
Risk warning: weak terminal consumption; inventory backlog; increased industry competition; improper cost control; improper merger and acquisition integration.