Introduction to this report:
The performance is in line with expectations, channel incentives and organizational structure are gradually being smoothed out, and it is expected that franchise expansion will be released at an accelerated pace, and the room for growth is worth looking forward to.
Key points of investment:
The performance was in line with expectations, and the rating was “increased”. Considering the slow recovery pace of women's bags, EPS for 2024-2025 was reduced to 0.50/0.60 yuan (original value 0.54/0.66 yuan), respectively, and EPS was added by 0.72 yuan. Considering the acceleration of franchise store expansion, the driving performance has strong growth elasticity. They were given 17.6x PE in 2024, maintain the target price of 8.80 yuan, and maintain the “gain” rating.
Performance summary: In 2023, the company achieved revenue of 590 billion yuan/yoy +33.6%, net profit of 333 million yuan/yoy +67.4%, net profit of 306 million yuan/yoy +71.9%; excluding impairment of goodwill, net profit of 373 million yuan/yoy +33.2%. 2024Q1 achieved revenue of 1,796 million yuan/yoy +17.9%, net profit of 131 million yuan/yoy +5.5%, net profit of 129 million yuan/yoy +5.4% after deducting non-return net profit. The overall performance was in line with expectations.
Gold's boom boosted, and profits exceeded expectations. The revenue side achieved relatively rapid growth, mainly driven by the continued boom in gold jewelry and the rapid expansion of the franchise market. 2024Q1 The company's gross profit margin for the single quarter was 24.92%/-3.11pct, net profit margin 7.28%/-0.86pct; the period expense ratio was 14.57%/-1.90pct, and the sales/management/ R&D/ financial expenses ratio changed year-on-year by -2.24pct/+0.49pct/-0.11pct/-0.04pct to 11.39%/1.80%/0.88%/0.51%, respectively.
The single-store model continues to be optimized, and it can be expected that franchise expansion will accelerate. Empowered by the gold category, the willingness of franchisees to open stores increased, with a net increase of 241 stores in 2023 (net increase of 291 franchisees). The net increase of 300 stores is expected in 2024-2025, respectively. The expansion of franchisees is gaining momentum at an accelerated pace, and room for growth can be expected. Newborn babies in the Year of the Dragon are expected to reach a small peak. Demand for gifts is boosted and released, compounded by a boost in gold prices. The gold category continues to be booming, and the growth rate can be expected to improve.
Risk warning: Competition in the industry is intensifying, and the pace of franchise and store expansion falls short of expectations.