Incident Overview
The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved revenue of 5.09 billion yuan/ +33.56%, net profit of 333 million yuan/ +60.93%, after deducting net profit of 306 million yuan/ +71.93%; the company plans to distribute a cash dividend of 2.5 yuan (tax included) for every 10 shares to all shareholders.
With 2024Q1, the company achieved revenue of 1,796 million yuan/ +17.87%, net profit of 131 million yuan/ +5.47%, net profit not attributable to mother of 129 million yuan/ +5.37%.
Analytical judgment:
Stores accelerated expansion through franchise and continued to increase gold product development in 2023. In terms of stores, the company achieved revenue of 590 billion yuan/ +33.56%: 1). By channel, ownership/ franchisee agent/ wholesale revenue was 32.58/24.81/135 million yuan, respectively, +14.53% year-on-year, +14.63%. Among them, the jewelry business achieved online sales revenue of 1,055 billion yuan/ +14.84% through third-party platforms; in terms of stores, the company's net increase of 241 jewelry stores throughout the year (new (382 stores were opened and 141 were closed), with a net increase of -50/+291, respectively. By the end of 2023, the number of jewelry stores was 1,399, of which 274/1125 were own/franchise stores, respectively. 2) By product, the revenue of fashion jewelry products/traditional gold products/leather goods was 29.89/22.65/371 million yuan respectively, +20.43%/+56.75%/+14.41% year-on-year. In line with current consumer demand, the company actively expanded the gold product structure and continued to increase the development of specialty gold product lines.
Gross margin declined structurally, and goodwill impairment preparations affected profits. In 2023, the company achieved net profit of 333 million yuan/ +60.93%, net profit margin of 5.59% /+0.95pct: 1) gross profit margin of 26.07%/-4.11pct. Among them, the gross margins of fashion jewelry products/traditional gold products/leather goods were 30.67%/8.73%/63.54%, respectively, -4.60pct/-0.50pct/-0.01pct, respectively. 2) On the cost side, the sales expense ratio is 14.03% /-3.49pct, the management expense ratio is 2.13% /+0.07pct, the financial expense ratio is 0.53% /-0.14pct, and the R&D cost rate is 1.06% /-0.29pct; the decrease in sales expenses is expected to be mainly due to cost dilution due to the expansion of franchised stores and revenue growth. The increase in management expenses is mainly due to the increase in financial incentives and depreciation and amortization expenses of the headquarters building. 3) In addition, in 2023, the goodwill impairment reserve of 39.43 million yuan formed by the company's acquisition of Finney.
24Q1 revenue continued to grow rapidly, and gross margin continued to be under pressure
2024Q1, the company's revenue was +17.87% year-on-year, and the high gold consumption led to continued rapid revenue growth; net interest rate 7.35% /-0.99pct, gross profit margin 24.92% /-3.11pct, sales expenses ratio 11.39% /-2.23pct, management expenses ratio 1.80% /+0.49pct, financial expenses ratio 0.51% /-0.04pct, R&D expense ratio 0.88% /-0.11pct.
Investment advice
We adjusted 2024-2025 and added a profit forecast for 2026. The company's revenue for 2024-2026 is estimated to be RMB 70.21/83.46/RMB 9.644 billion (the original forecast was RMB 6.683/7.958 billion yuan for 2024-2025, respectively), and net profit to the mother will be RMB 3.94/4.71/563 million yuan respectively (the original forecast for 2024-2025 was RMB 461/558 million), and EPS was RMB 0.44/0.53/0.63, respectively (original forecast 2024 -0.52/0.63 yuan respectively in 2025), and the closing price on April 26 (6.15 yuan) was 14/12/10 times PE, respectively, maintaining the “buy” rating.
Risk warning
Competition in the industry intensifies, gold prices fluctuate greatly, franchise expansion falls short of expectations, and risk of impairment of goodwill.