Report summary:
Incidents:
Chao Hongji released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 5.09 billion yuan/ +33.56%, net profit of 333 million yuan/ +67.41%, net profit of 306 million yuan/ +71.93%, and non-recurring profit and loss of 0.28 million yuan, mainly from non-current asset disposal gains and losses. It plans to distribute cash dividends of 2.5 yuan (tax included) for every 10 shares. 2023Q4 achieved revenue of 1,401 billion yuan/ +35.14%, net profit attributable to mother of 20 million yuan/reversal of losses, and net profit not attributable to mother - 0.2 billion yuan/loss reduction. 2024Q1 achieved revenue of 1,796 million yuan/ +17.87%, net profit of 131 million yuan/ +5.47%, net profit of 119 million yuan/ +5.37% after deducting non-return to mother net profit.
Comment:
Gold and jewellery performed well, and revenue increased significantly. In 2023, the company's revenue was 5.09 billion yuan/ +33.56%, by product: 1) Fashion jewelry revenue of 2,989 million/accounting for 50.66%/+20.43%; 2) traditional gold revenue of 2,225 million/accounting for 38.39%/+56.75%; 3) leather goods revenue of 371 million/accounting for 6.29%/+14.41%; 4) revenue of other products: 36 million/accounting for 0.60%/+7.17%; 5) Agency brand licensing and franchise service revenue of 214 million/proportion 3.63% /+ 68.19%; 6) Other business revenue of 25 million/ accounting for 0.43%/+334.17%. By sales model: 1) Self-operating revenue of 3.258 billion/ accounting for 55.23%/+14.53%; 2) Franchise agent revenue of 2,481 million/accounting for 42.06%/+67.55%; 3) wholesale revenue of 135 million/accounting for 2.29%/+57.63%; 4) Other business revenue of 0.25 million/accounting for 0.43%/+334.17%. Benefiting from the boom in gold and the steady increase in product strength, the company's gold product revenue grew rapidly. Furthermore, the company's 24Q1 revenue continued to grow steadily under a high base, continuing to demonstrate long-term growth.
The results of improving quality and efficiency have been shown, and the cost rate has declined steadily. The company's expense ratio in 2023 is 17.76% /-3.85pct, of which: 1) sales expenses of 828 million yuan/ +6.96%, sales expenses rate of 14.03% /-3.49pct; 2) management expenses of 126 million yuan/+ 38.13%, management expenses ratio 2.13% /+0.07pct, due to increased equity incentive costs and depreciation and amortization expenses of the headquarters building; 3) R&D expenses 0.66 million yuan/+ 4.76%, R&D expenses ratio 1.33% /-0.29pct; 4) financial expenses 0.66 100 million/ +5.84%, financial expense ratio 0.99%/-0.14pct...
Investment advice: The company continues to create differentiated jewelry products with original design and intangible heritage culture, benefiting deeply from jewelry consumption trends that enhance self-satisfaction. Currently, the brand is in a stage of rapid store expansion and has strong potential for growth. The company's revenue for 2024-2026 is estimated to be 7.182 billion/ 8.489 billion/ 9.797 billion, and net profit to mother will be 424 million/512 million/600 million, respectively. The corresponding PE is 13 times, 11 times, 9 times, respectively. First coverage, giving a “buy” rating.
Risk warning: Market competition intensifies; store expansion falls short of expectations; product promotion falls short of expectations; performance forecasts and valuation judgments fall short of expectations.