The company's net profit to mother fell 90.5% year on year to 68.96 million yuan, maintaining an increase in holdings and publishing an annual report. In 2023, it achieved revenue of 2.118 billion yuan (yoy -40.78%) and net profit to mother of 68.96 million yuan (yoy -90.54%), in line with previous performance forecasts (6036-90.45 million yuan). 24Q1 achieved revenue of 426 million yuan (yoy -39.52%) and net profit of 29.46 million yuan (yoy -70.81%). The decline in revenue and profit was mainly due to the rapid decline in diamond sentiment and adjustments in the company's stores. We expect the company's net profit to return to mother in 24-26 million yuan (the value was 550 to 680 million yuan 24-25 years ago; the reduction was due to major store adjustments). Referring to Wind's 14.1xPE in 2024, considering that the diamond brand industry has entered the survival of the fittest stage and that Dia's beneficiary industry's share of liquidation is expected to increase. At the same time, considering the company's abundant cash on the books, the company was given 25xPE, with a target price of 24.75 yuan (previous value of 34.25 yuan), maintaining an increase in holdings rating.
The company's gross margin has declined, and sales and management expenses have increased to varying degrees. The diamond jewelry industry is directly related to the macroeconomy on the one hand, and directly related to the industrial price system. Prices continue to fall due to high channel inventories in the industry. Combined with the impact of nurturing drills, the company's operations were sluggish. Gross margin fell 1.0 pct year on year in 2023, and gross margin fell 4.1 pct year on year in 24Q1. In terms of the cost ratio for the period, due to the decline in revenue, the company's sales expense ratio increased 17.7 pct year over year, and the 24q1 sales expense ratio increased 6.1 pct year over year; the management expense ratio increased 2.5 pct year over year in 23, and the management expense ratio increased 2.1 pct year over year in 24Q1.
Stores continue to adjust, and the company tests the waters of the gold business
In 2023, the company opened 24 new stores, closed 184 stores, and closed 160 stores. In 24Q1, the company closed 37 stores. Continued rise in gold prices has spawned consumer demand for value preservation, while improvements in gold technology have made young consumers prefer gold jewellery. Beginning in 2023, the company gradually increased its investment in gold products and launched a series of models one after another.
As economic growth recovers and consumer confidence recovers, the company's business is expected to pick up. Unlike the gold jewelry industry, the diamond jewelry industry has lighter assets but heavier operations. The company's short-term profits are under great pressure, but benefiting from the clean-up of the industry, its market share is expected to buck the trend. We expect the company to return net profit of 3.9, 5.0, and 610 million yuan in 24-26 years. Referring to Wind's 14.1xPE in 2024, considering that the diamond brand industry has entered the survival of the fittest stage, and that Dia's share of beneficiary industries is expected to increase. At the same time, considering that the company has plenty of cash on its books, the company was given 25xPE with a target price of 24.75 yuan, maintaining an increase in holdings rating.
Risk warning: Macroeconomic growth is slowing, the diamond boom continues to decline, and corporate channels are being adjusted.