Event: The company released its report for the first quarter of 2024. During the reporting period, the company achieved revenue of 5.485 billion yuan, +12.37% year on year; net profit to mother of 380 million yuan, +13.87% year on year; deducted non-net profit of 328 million yuan, +11.1% year over year.
Profitability remained stable in 24Q1.
Gross profit margin: 24Q1, the company's comprehensive gross margin was 20.17%, +0.49 pct year over year, and +4.54 pct month-on-month.
The significant month-on-month increase in gross margin is mainly due to the fact that Q4 is the peak season for direct office sales. The revenue share is usually higher than Q1, and the characteristics of low gross margin lower the overall level.
Expense rate: 24Q1, the cost rate during the company period was 11.97%, +0.18 pct year-on-year. Among them, sales/management/R&D/finance expenses were 7.41%/3.94%/0.88%/-0.26%, respectively, with year-on-year changes of +0.43 pct/-0.02 pct/-0.08 pct/-0.14 pct.
Deducted non-net interest rate: In 24Q1, the company deducted non-net interest rate of 5.97%, -0.07 pct year on year, and +0.61 pct month-on-month.
The traditional core has achieved double-digit growth, and the growth rate of online business is impressive. In 24Q1, the company's traditional core business reached 2.68 billion yuan, +11.7% year-on-year. Among them, Chenguang Technology achieved 247 million yuan, +32.72% year-on-year.
The company continues to promote product optimization, develop products with popular ideas, increase single product delivery rates and sales contributions; promote omni-channel layout, and focus on key terminals to improve the quality of single stores.
Major retail stores are developing steadily, and operational capabilities are continuously strengthened. In 24Q1, the company's retail business reached 371 million yuan, +23.53% year-on-year. Among them, Jiumu Sundries Club achieved 348 million yuan, +25.05% over the same period last year. By the end of the reporting period, the company had 678 major retail stores nationwide (+19 compared to the end of 23), including 639 Jiumu Grocery Store (+21) and 39 Chenguang Living Center (-2). Focusing on the “Xueba Member Structure and Quality Improvement” strategy, the company continues to make efforts to optimize member operations and store operating standards to achieve an increase in the repurchase rate and customer unit price, and increase the sales ratio of high-end products in this channel.
The growth rate of direct office sales has slowed slightly, and business expansion has been steadily promoted. In 24Q1, the company's direct office sales business reached 2,947 billion yuan, +11.59% year-on-year. The company continuously improves service quality, enriches product categories, strengthens customer discovery and internal share, builds a national supply chain system, and enhances core competitiveness. At the same time, the company continues to expand MRO industrial products, marketing gifts, and employee welfare business scenarios based on one-stop office procurement.
Investment advice: The company continues to optimize the traditional core business layout, adjust the product structure, improve channel efficiency, expand the retail business rapidly, and expand the direct office sales business steadily. The future growth is remarkable. The company is expected to achieve basic earnings of 1.98/2.35/2.77 yuan per share in 2024/25/26, corresponding PE is 17X/ 15X/ 12X, maintaining the “recommended” rating.
Risk warning: the risk that the recovery of consumption power falls short of expectations, the risk of procurement demand falling short of expectations, and the risk of increased market competition.