Incident: The company announced its 2023&24Q1 results. In 2023, it achieved revenue of 56.364 billion yuan, net profit to mother of 973 million yuan, an increase of 27.2%, net profit of 881 million yuan after deducting net profit of 881 million yuan, an increase of 26.81%, and net cash flow from operating activities of 1,577 million yuan, an increase of 32.14%. 24Q1 achieved revenue of 18.25 billion yuan, an increase of 13.08%, net profit of 363 million yuan, an increase of 21.09%, net profit after deducting non-return to mother of 369 million yuan, an increase of 33.21%, and net cash flow from operating activities of 1,094 billion yuan, which changed from negative to positive year-on-year.
Comment:
Since listing, the dividend rate has increased year by year. In 2023, the company plans to pay a cash dividend of 4.50 yuan (tax included) for every 10 shares, with a total cash dividend of 756 million yuan, and a cash dividend rate of 77.66%. The dividend ratio has increased year by year since listing. The dividend rates for 2021 and 2022 are 50.75% and 65.85% respectively.
Gold products benefited from the boom in the industry, and the January fair had a “good start”. By product in 2023, gold products/K gold jewelry/brand royalty/management service fee revenue was 554.85/3.56/1.10/0.84 billion yuan respectively, +20.09%/-26.51%/+40.67%/-10.33%/-10.33%, and the gross margin for gold products/K gold jewellery was 3.67%/18.30%, +0.36/ -3.86PCT, and the gross margin for brand usage and management service fees was 100%. By sales model, direct sales/distribution revenue was 329.35/23.10 billion yuan respectively, up 15.41%/26.08%; gross margin was 2.81%/5.93%, respectively, +0.35/ -0.10PCT year on year. 24Q1 gold and jewelry sales revenue was 18.030 billion yuan, up 12.82% from the same period, and service fee revenue was 34 billion yuan, up 299.47%. On January 3-4, the company held the 2024 New Year Fair in Shuibei, Shenzhen. It sold nearly 2 tons of new products and achieved a “good start”.
Net store opening in 2023 exceeded expectations, and franchise channel adjustments were gradually put in place. In 2023, the company closed 2 direct-run stores and net opened 617 franchise stores, for a total of 615 net stores. In 24Q1, the company opened 0 direct stores and 8 net franchised stores, for a total of 8 net stores. By the end of the 24Q1 period, the total number of stores was 4265.
Since 2022/Q3, channel adjustments have gradually been put in place, 2023Q2 stores have resumed positive growth, and the expansion of 2023Q3-Q4 franchises has accelerated markedly.
Gross margin increased year-on-year in 2023&24Q1. We mainly expect: 1) an increase in gold prices, an increase in gross margin through direct sales channels, and 2) an increase in the share of sales of new exclusive gold products with relatively high gross margins.
The gross sales margin for 2023/24Q1 was 4.13%/4.09% respectively, up 0.23/0.10PCT year-on-year. Among them, since the company mainly uses gold leasing to obtain raw materials for gold, the increase in gross profit brought about by the rise in gold prices was partially offset by investment income and fair value change gains and losses brought about by gold leasing. In 2023, the company's return of leased gold resulted in investment losses of 333 million yuan, an increase of 208 million yuan over the previous year; fair value change income was -034 million yuan, of which fair value change income from daily accounting for leased gold was -34 million yuan (-119 million yuan in 2022), and the floating profit and loss period for gold positions at the end of the Shanghai Gold Exchange period was 426,200 million yuan.
2023&24Q1 net margin increased slightly. In 2023, the sales/management/R&D/finance expense rates were 0.88%/0.33%/0.05%/0.04%, respectively, -0.07/+0.02/-0.01/-0.01PCT year on year, and the net sales margin was 1.73%, +0.1PCT year on year. 24Q1 sales/management/R&D/finance expense ratios were 0.70%/0.20%/0.02%/0.07%, respectively, +0.07/-0.03/-0.02/+0.03PCT, and the net sales margin was 2.00%, +0.13PCT year on year.
Profit forecast: We expect the company's revenue for 2024-2026 to be 631/702/77.4 billion yuan, up 12%/11%/10%; net profit to mother will be 11.28/12.74/1,435 billion yuan, up 16%/13%/13%; EPS will be 0.67/0.76/0.85 yuan, respectively. Corresponding to the closing price of April 29, PE will be 17/15/13X, respectively.
Risk factors: Gold prices fluctuate sharply, store openings fall short of expectations, e-commerce profits fall short of expectations.