Incident: The company announced its 2023 annual report and 2024 quarterly report. For the full year of 2023, the company achieved operating income of 16.290 billion yuan, +46.5% year-on-year; realized net profit to mother of 1,316 billion yuan, +20.7% year-on-year.
24Q1 achieved operating income of 5.070 billion yuan, +23.0% year on year; realized net profit of 341 million yuan, -6.6% year over year.
The overall gross margin declined due to the increase in the share of the gold wholesale business, and the cost ratio continued to be optimized during the period. In 2023, the company's gold wholesale business accounted for about 62.6%, +5.4 pct year on year. The gross margin was only 5.1%, which is significantly lower than the level of 23% of its own gold business, resulting in a comprehensive gross margin of -2.64 pct to 18.1% year on year in 23.
The fee rate for the 23-year period reached 6.6%, -1.01 pct year on year, resulting in a net profit margin of 8.1% and -1.73 pct year on year.
The share of plain gold jewelry continues to rise, and the total number of stores has exceeded 5,000. (1) By product: Demand for the mosaic category continues to weaken, and the gold category continues to dominate. In '23, the revenue of plain gold jewelry was 13.720 billion yuan, +62.0% year over year, accounting for 84.2%; inlaid jewelry revenue was 918 million yuan, -29.4% year over year, accounting for 5.6%; other jewelry achieved revenue of 361 million yuan, +25.2% year over year, accounting for only 2.2%. (2) View by channel: The company adheres to the “epitaxial, scale-first” channel construction strategy and continuously deepens store coverage. As of '23, there were 5106 stores, including 331 self-operated stores and 4775 franchised stores, with a net opening of 490 during the year. From a revenue perspective, self-operated/franchised/online revenue in '23 was 16.17/119.72/2,508 billion yuan respectively, +51.3%/+44.3%/+62.3% year-on-year.
Investment advice: IP co-branding creates explosive products, and the brand matrix-based approach accelerates market penetration. During the reporting period, the company and “National Treasure” jointly launched the “Chinese National Treasure Art Collection” and the National Museum of France jointly launched the “Monet Garden” series, which was well received by consumers. At the same time, “Chow Tai Sang Classic Store” and “Chow Tai Sang National Treasure Store” were launched to accelerate the expansion of the terminal market through differentiated store play. Therefore, we expect the company to achieve operating income of 200.75/228.25/25.316 billion yuan in 24-26; achieve net profit of 16.05/18.27/1.941 billion yuan; EPS of 1.46/1.67/1.77 yuan, respectively. The current stock price corresponds to PE of 11.1/9.7/9.1 times, respectively, and maintain an “increase” rating.
Risk warning: consumption recovery falls short of expectations; sharp fluctuations in gold prices; intensification of industry competition, etc.