The company released its 2024 quarterly report. The 24Q1 company achieved revenue of 3.308 billion yuan, -1.74% year on year; net profit attributable to mother was 202 million yuan, -10.86% year over year; net profit after deducting non-return to mother was 193 million yuan, -13.72% year over year.

In the short term, the company's performance was affected by the upward trend in new projects. The medium- to long-term taxable business grew steadily, and the duty-free business gradually expanded, maintaining an increase in holdings ratings.

Key points to support ratings

New business formats and stores are still being nurtured, putting pressure on performance in the short term. The 24Q1 company achieved revenue of 3.308 billion yuan, -1.74% year on year; net profit attributable to mother was 202 million yuan, -10.86% year over year; net profit after deducting non-return to mother was 193 million yuan, -13.72% year over year. Affected by the market environment, the company's Q1 revenue declined slightly year-on-year. At the same time, due to the company's new business format and new stores still in the cultivation period, the revenue increase was not enough to cover relatively fixed costs and expenses. In addition, high-rent projects with long leases were greatly affected by the new leasing guidelines in the early stages of leasing, which had a certain impact on the performance side.

Net gross profit declined slightly year-on-year, and the expense ratio increased during the period. The 24Q1 company's gross margin was 41.22%, -1.58pct year on year; the net margin was 6.31%, -0.60pct year on year. The 24Q1 company's sales expense ratio and management expense ratio were 13.34%/15.21%, respectively, +0.07/+1.21pct year-on-year, respectively.

Ole's business has performed well, and the duty-free program continues to climb. 24Q1 department store/shopping center/olai/supermarket/specialty store/duty-free business achieved revenue of 14.49/6.74/5.88/0.81/3.78/121 million yuan, respectively -11.25%/+3.52%/+9.45%/-31.06%/-4.98%/+116.78% year-on-year; gross margin was -1.81/-4.15/-5.29/+1.66/+0.20/+3.37pct, respectively. Among them, the Ole and shopping center business formats have shown strong business resilience because they carry more service experience content and cost-effective content, meet diverse needs in one stop, and meet the advantages of meeting the new era and new lifestyle consumption. Due to the low base of the tax exemption business for the same period last year and the change of related revenue recognition from the total amount method to the net amount method, revenue and gross margin changed significantly. Moreover, duty-free stores continued to climb. In Q1, Wangfujing International Duty Free Port sales and passenger traffic reached new highs, with revenue and passenger flow +81%/33% year-on-year respectively.

It is proposed to repurchase shares of 1-2 billion yuan. On April 18, the company reviewed and passed the “Proposal on a Plan to Repurchase Shares through Centralized Bidding Transactions”, which plans to buy back the company's issued RMB common shares through centralized bidding transactions. The repurchase amount is 1-2 billion yuan, and the repurchase price of shares is not higher than 17.50 yuan/share.

valuations

In the short term, new projects have dragged down performance. In the medium to long term, Olai/shopping malls have shown strong resilience and are expected to maintain steady growth; duty-free sales on the outlying islands will continue, and the subsequent launch of duty-free shops in the city is expected to broaden imagination. We expect the company's 24-26 EPS to be 0.81/1.04/1.21 yuan, corresponding price-earnings ratio of 16.8/13.0/11.2 times, and maintain an increase in holdings rating.

The main risks faced by ratings

The duty-free business fell short of expectations, the recovery in consumer consumption fell short of expectations, and market competition increased risks.