The company achieved operating income of 3.03 billion yuan in 2023, down 1.6% year on year, and realized net profit of 570 million yuan, up 7.02% year on year. 24Q1's revenue and net profit to mother increased by 5.2% and 10.2%, respectively. The company plans to pay 540 million dividends, with a dividend rate of 95.1%, and continue to implement a high dividend policy.
By channel, revenue from online, direct and franchise channels declined by -5.5%, 1.1%, and 0.4%, respectively, in 2023, and group buying revenue increased 19.5% year on year. On the offline side, by the end of 2023, the number of direct-run and franchised stores was 484 and 1,010, respectively, with a net opening of 13 and 11 stores, respectively. On the online side, Tmall, JD, and Vipshop accounted for 25%, 39%, and 14% of revenue respectively in 2023. The company's e-commerce team consists of about 231 people. The team always follows product value as the core consideration, always pays attention to product upgrades, material upgrades, marketing upgrades, and organizational structure upgrades. The e-commerce team assesses net profit and follows high-quality development.
Gross profit margin reached a record high. Gross margin increased 2.5 pct to 55.6% year over year in 2023. Looking at the breakdown, online, direct management, franchise and group buying channels increased 1.7, 3.6, 3.6, and -0.7 pct year over year, respectively. We judge that this was more due to product restructuring (increase in the share of high-margin products). By the end of 2023, the company's inventory turnover was 196 days, which was basically the same as the previous year. The net cash flow from operating activities was 766 million, compared to 770 million in the same period last year.
Relying on retail data insight and consumer demand analysis, the company iterates products in terms of design innovation, process innovation, material upgrades, and functional upgrades around the IP themes of “Oriental Aesthetics and “Paying Homage to Classics” to lead a stylish lifestyle in the sleeping home. In terms of channels, the company focuses on setting up super image stores in key cities, highlighting the brand value of artist textiles, and gradually developing a range of home fashion products. In addition, in 2023, the company will accelerate digital and intelligent transformation, strengthen supply chain management, introduce new technology to improve the level of full-link management, collect and monitor indicators of all aspects of the supply chain in real time, strengthen supply chain scheduling and optimization, and improve overall efficiency.
Against the backdrop of a weak consumer environment, the company's operations have shown strong resilience, and refined management is showing increasing results. At the same time, various indicators (including gross profit margin, net interest rate, cash flow, ROE, etc.) have continued to improve, and the report quality is excellent. Furthermore, the company's long-term high cash dividend ratio also reflects the long-term importance it attaches to shareholder returns.
According to the annual report and quarterly report, we adjusted the profit forecast and introduced the 2026 profit forecast. The company's earnings per share for 2024-2026 are 0.77, 0.85, and 0.94 yuan respectively (the original 2024-2025 was 0.79 and 0.88 yuan). Considering the company's excellent operating quality, steady performance, and continued high dividends, we adjusted the DCF valuation. The target price was 14.97 yuan, which was raised to a “buy” rating.
Risk warning: increased competition in the industry, weakening demand for terminal consumers, etc.