Event Overview: In 2023, the company achieved operating income of 56.364 billion yuan, +19.61% year over year; realized net profit of 973 million yuan, +27.20% year over year; net profit after deducting non-return to mother was 881 million yuan, +26.81% year over year. In 24Q1, revenue was 18.251 billion yuan, +13.08% year over year; net profit to mother was 363 million yuan, +21.09% year over year; net profit after deducting non-return to mother was 369 million yuan, +33.21% year over year.
Sales of gold and jewelry products led to steady revenue growth, and the share of revenue from the distribution model increased. In 2023, the company achieved revenue of 56.364 billion yuan, +19.61% year-on-year. By industry, gold and jewelry sales revenue was 55.841 billion yuan, +19.61% year over year; service fee revenue was 194 million yuan, +12.87% year over year. By product, gold products achieved revenue of 55.485 billion yuan, +20.09%; K gold jewelry products achieved revenue of 356 million yuan, -26.51% year over year; brand usage revenue of 110 million yuan, +40.67% year over year; and management service fee revenue of 84 million yuan, -10.33% year over year. By channel, the direct sales model achieved revenue of 32.935 billion yuan, +15.41% year over year; the distribution model achieved revenue of 23.10 billion yuan, +26.08% year over year, accounting for 41.0% of revenue, +2.1 pct year on year.
Benefiting from rising gross margins and declining rates due to scale effects, profitability continues to increase. 1) Gross margin side: In 2023, gross sales margin was 4.13%, +0.23 pct year-on-year. By product, the gross margin of gold products was 3.67%, +0.36 pct year on year; the gross margin of K gold jewelry products was 18.30%, -3.86 pct year on year. By channel, the gross margins of the direct sales model and distribution model were 2.81% and 5.93%, respectively, +0.35 and -0.10 pct year-on-year, respectively. The increase in gross margin was mainly driven by rising gross margin of gold products and channel optimization. In 24Q1, gross margin was 4.09%, +0.11 pct year over year. 2) Rate side: In 2023, sales rates, management rates, R&D rates, and financial rates were 0.88%, 0.33%, 0.05%, and 0.44%, respectively, -0.07, +0.02, -0.01, and -0.01pct, respectively; 24Q1, sales rates, management rates, R&D rates, and financial rates were 0.70%, 0.20%, 0.02%, 0.07%, respectively. The downside of the rate side was +0.07, -0.03, -0.02, and +0.03 pct, respectively. effects. 3) Net margin side: Based on gross margin and rate conditions, in 2023, the net interest rate was 1.73%, +0.11 pct year on year; in 24Q1, the net margin was 2.00%, +0.13 pct year on year, and the company's overall profitability continued to rise.
The company is opening stores at a steady pace and is actively promoting channel decline. In 2023, there was a net increase of 615 stores, including a net decrease of 2 direct-run stores and a net increase of 617 franchisees, and a steady pace of store opening. As of the end of 2023, the company had 4,257 terminal stores. Includes 103 direct-run stores and 4154 franchised stores. In 24Q1, there was a net increase of 8 affiliate stores. Looking at the store opening plan, in 2024, it is planned to add 6 direct-run stores and 216 franchise stores (mainly in East China, Central China, Northwest China, and Southwest China). Looking at the channel layout, franchise channels have increased their policies and financial support, driving service centers and franchisees to bucking the trend; after achieving full coverage of the six major state-owned banks, 12 commercial banks and many local banking channels, the banking and mail business continues to expand the channel scale, improve the precious metal product sales network layout, and deepen cross-border cooperation; e-commerce channels cooperate closely with major platforms, and self-operated stores and online authorized stores take a dual approach to strengthen and improve live streaming, promote brand self-broadcasting and other businesses, and further increase consumer stickiness.
Direct business increases quality and efficiency due to corporate policies; online and offline repurchase business go hand in hand to create a “China Gold” recycling brand.
Release the 2023 profit distribution plan. The company plans to distribute cash dividends of 450 yuan (tax included) for every 10 shares to all shareholders, based on a total share capital of 1.68 billion shares, and a total cash dividend of 756 million yuan, accounting for 77.66% of net profit attributable to mother.
Give full play to the advantages of gold products and enrich the product structure to create new growth points. 1) Gold repurchase business: around the brand core of “where sincerity comes, gold and stone is open”, select regions with strong domestic gold industry development, build a gold and jewelry cultural and creative industrial park through brand leadership, enrich the product structure, and create new profit growth points. Continue to increase the construction of repurchase channels, complete the closed loop of gold circulation, and promote the liquidity of the gold stock market. 2) Cultivating the diamond business: Expanding the cultivating diamond business, integrating classics and trends to launch 95 products, creating 18K gold diamond product series such as “Highlight Now” and “In the Name of Love” and gold diamond product series such as “5G Handmade Gold”; established a cultivating diamond (new material) promotion division; reached a strategic cooperation with Jingtuo Diamond; successfully launched the “Inherit Classics, Innovate the Future” China Gold Cultivating Diamond Online Press Conference on June 18, 2023, and opened the China Gold Jingdong Diamond Cultivation Flagship Store to actively pay and expand praise and expand Other platforms Cooperation, such as the establishment of the Xiaohongshu platform China Gold Cultivating Diamond Official Enterprise Number, etc., the company's diamond cultivation layout has effectively adjusted the product structure and reduced its dependence on a single category.
Investment advice: While the company has advantages in gold products, the channel layout is gradually deepening to create new growth points. It is expected to achieve revenue of 649.73, 721.91, and 78.234 billion yuan in 24-26 years, +15.3%, +8.4% year-on-year; net profit to mother is 11.94, 13.88 and 1,542 billion yuan, +22.6%, +16.3%, +11.1%. The closing price on April 29 corresponds to PE 16/14/12 times, maintaining the “recommended” rating.
Risk warning: The competitive landscape of the industry has intensified, product promotion falls short of expectations, and industry demand falls short of expectations.