Event: The company released its 2023 annual report and 2024 quarterly report.
23 Full year: Revenue of 3.54 billion yuan/ +22.6%, net profit attributable to mother of 90,000/ +25.2%, net profit of 870 million/ 29.4% deducted from non-mother.
24Q1: Revenue of 1.27 billion yuan/ +17.6%, net profit of 360 million/ +20.4%. The high base for the same period last year combined with pressure on the consumer environment this year achieved double-digit growth in revenue and profit.
Revenue continues to grow steadily, and development resilience is strong: By channel, revenue from direct management, franchise, and e-commerce channels in '23 was 24.0, 9.2, and 200 million yuan, +34.6%, -2.1%, and +16.1%, respectively. Growth was mainly driven by direct management channels, and franchises maintained steady growth. In terms of offline stores, the company implemented a channel strategy of “expanding the area, moving the location, and changing the image”, and actively laid out shopping centers. The 23H2 subsidiary has 1,255 terminal sales stores, of which 607 are directly managed and franchised (net change +28) and 648 (net change +36), respectively. Online channels simultaneously boost public and private domains through Tmall, JD, Vipshop, Douyin, and WeChat applet platforms, and online revenue was +16% compared to the same period.
Profitability continued to improve. Gross profit margin and net margin improved in '23 & 24Q1: The company's gross margin in '23 was 78.6%, +1.2pct year on year. Among them, direct management, franchise, and online gross margins were 83.1%, 70.3%, and 70.6%, respectively, +1.0, -0.7, and +7.2 pct, respectively. Online gross margins have improved significantly. The sales, management, R&D, and financial expense ratios for 23 years were 37.1%, 7.9%, 3.5%, and -0.8%, respectively, +1.2, +1.1, flat, and -0.5 pct. We believe that the increase in the cost rate is mainly due to the formation of international brand teams and the maintenance of large investment in domestic brands. Net profit for the full year was 90,000,000, +25.2% year-on-year, and net interest rate improved by 0.6pct to 25.8%. 24Q1 gross margin increased 0.3 pct to 76.0% year on year, and net margin +0.8 pct year on year to 28.6% year on year. Performance continued to improve, highlighting the brand's high-end image.
International rebranding is progressing steadily. New K&C products will be unveiled in the fall and winter of 24: in April '23, the company completed the acquisition of global trademark ownership rights for CERRUTI 1881 and K&C brands, and has also re-established two brand headquarters in Paris to establish a Paris R&D center to build an international team for product design, development and brand operation. New products under the KENT & CURWEN brand will be launched in the fall and winter of 2024, and we will continue to actively monitor the progress of the company's internationalization strategy.
Profit forecast and investment advice: In the future, the company will promote the international high-end process based on adhering to the core strategy of a multi-brand matrix. The main brand of Bienleven and the golf brand are expected to maintain relatively rapid growth; international brands are expected to establish the company's second growth curve after being reshaped in the next few years. In the medium to long term, the company uses a multi-brand strategy to deeply lay out the international market, promote the international high-end process, and aim to become a world-renowned luxury group for 100 years. We expect the company to achieve net profit of 1.15 billion yuan and 1.37 billion yuan in 2024-2025. The current stock price corresponds to the 23-year P/E of 15x, maintaining the company's “recommended” rating.
Risk warning: increased competition for high-end clothing; weak terminal consumption; risk of continued inventory backlog.