The company achieved operating income of 3.54 billion yuan in 2023, an increase of 22.6% over the previous year, and achieved net profit of 911 million yuan, an increase of 25.2% over the previous year. 24Q1's revenue and net profit to mother increased by 17.6% and 20.4%, respectively, over the same period last year, exceeding market expectations. The company plans to pay 570 million dividends, with a dividend rate of 62.7%, a significant increase over the previous year.
By channel, revenue from online, direct, and franchise channels increased 16%, 35%, and -2% year-on-year respectively in 2023, and gross margins increased 7.2 pct, 1 pct, and -0.7 pct, respectively. Looking at offline channels, by the end of 2023, direct-run and franchised stores had a net opening of 28 and 36 stores respectively, for a total of 64 stores. We expect the company's net store opening to accelerate in 2024.
The quality of operations has improved markedly. By the end of 2023, the company's inventory turnover was 346 days, a sharp drop of 42 days from the previous year, the business cycle was 375 days, and a sharp drop of 46 days from the previous year, indicating that the company's operating efficiency is improving.
Net cash flow from operating activities in 2023 was $1,296 million, surpassing that year's net profit, and also improved significantly compared to last year ($942 million for the same period in 2022).
The internationalization strategy is progressing steadily, and the construction of a brand matrix is in progress. In April 2023, the company completed the acquisition of global trademark ownership of CERRUTI 1881 and KENT CURWEN brands. Since then, the company has re-established the two brand headquarters in Paris, France, and established a Paris R&D center to build an international team for product design, development and brand operation. On September 6, 2023, the company officially announced Daniel Kearns as the chief creative officer, responsible for the two brands of men's and women's ready-to-wear, haute couture, leather goods, accessories and lifestyle collections. Among them, new products from the KENT CURWEN brand will be the first to be unveiled in the fall and winter of 2024, which is worth looking forward to.
24Q1 In the context of the overall pressure on the brand apparel industry, the company continues to lead the growth of the industry, which is invaluable. As an operator of domestic high-end fashion sportswear brands and international luxury brands, combined with its differentiated brand positioning, it is scarce in the A-share market. According to wind data, the company's ROE (weighted) remained at a high level of around 20% in 2019-2022, and the net sales margin also increased steadily from 2020, and reached a record high in 2023; on the other hand, in terms of inventory and dividends, which the market is paying more attention to, there has also been a marked increase in 2023.
Furthermore, the company's internationalization and multi-brand matrix are progressing steadily, and we are optimistic about the company's medium- to long-term growth.
According to the annual report and quarterly report, we adjusted our profit forecast and introduced the 2026 profit forecast. We expect earnings per share of 2024-2026 to be 1.99, 2.42, and 2.91 yuan (previously 2.06 and 2.46 yuan for 24-25), respectively. Referring to comparable companies, we will give 2024 a PE valuation 19 times, corresponding to a target price of 37.81 yuan, maintaining a “buy” rating.
Risk warning: Industry competition intensifies, terminal consumer demand weakens, new brand acquisition integration falls short of expectations, etc.