An overview of the incident. In 2023, we achieved revenue of 71,436 billion yuan, +13.37% year over year; net profit attributable to mother was 2,214 billion yuan, +30.23% year over year; net profit after deducting non-return to mother was 2.156 billion yuan, +24.83% year over year. In 24Q1, revenue was 25.630 billion yuan, +4.36% year over year; net profit to mother was 802 million yuan, +12.00% year over year; net profit without return to mother was 835 million yuan, +13.82% year over year.
Revenue rose steadily, and the jewellery and wholesale model contributed the main revenue. By industry, in '23, pen revenue was 224 million yuan, +3.66%; jewelry revenue was 58.136 billion yuan, +15.44% year over year; gold trading revenue was 1,275 million yuan, +5.53% year over year; handicraft sales revenue was 58 million yuan, or -37.16% year over year; and other revenue was 65 million yuan, or -44.30% year over year. By sales model, revenue from the wholesale model was 54.304 billion yuan, +14.35%; revenue from the retail model was 4.114 billion yuan, +29.40% year over year; and revenue from gold trading was 12.750 billion yuan, +5.53% year over year.
24Q1 gross margin increased year-on-year, and the rate side was well controlled. ① On the gross margin side, in '23, gross margin was 8.30%, +0.72pct. The overall gross margin increased mainly due to rising gold prices and rising gross margin in the gold jewellery business, which accounts for the highest revenue share. By industry, the gross margin of pens/ jewelry/ gold trading/ handicraft sales was 25.47%/9.84%/0.00%/23.73%, year-on-year, -5.28/+0.71/+0.03/+6.23 pct. By sales model, the gross margin of wholesale, retail and gold trading was 8.93%/22.91%/0.00%, +0.27/+5.02/+0.03 pct year-on-year. In 24Q1, gross margin was 8.37%, +0.35 pct year over year. ② On the rate side, in 23 years, the sales rate/management rate/R&D rate/finance rate were 1.48%/0.69%/0.05%/0.20%, respectively, +0.16/+0.05/0/ -0.12 pct. Among them, the increase in sales rate and management rate was mainly due to an increase in social security and welfare expenses for the company's sales personnel and management personnel; 24Q1, sales rate/management rate/R&D rate/finance rate was 1.25%/0.49%/0.04%/0.23% year-on-year, -170./0.0.0-0.23%, year-on-year 1/ -0.02 pct. ③ Net margin side: Based on gross margin and rate conditions, in 23, the net interest rate was 4.17%, +0.57pct year on year; in 24Q1, the net margin was 4.11%, +0.22 pct year on year, and profitability continued to increase.
The 23-year operating target was exceeded, and the 24-year operating target progressed steadily. The proposed cash dividend ratio for 2023 reached 46.07%. 1) Achievement of the main operating indicators in 23 years: total revenue of 71,436 billion yuan, 107.42% of the target; total profit of 3,979 billion yuan, 124.34% of the target; net profit to mother of 2,214 billion yuan, 123.00% of the target. 2) The budget targets for the main economic indicators in '24 are: total revenue of 75.007 billion yuan, +5.00% year over year; total profit of 4.138 billion yuan, +4.00% year over year; net profit to mother of 2,304 billion yuan, +4.04% year over year. 3) Profit distribution plan: It is proposed to distribute dividends of 19.50 yuan (tax included) to all shareholders for every 10 shares based on the total share capital of 523 million shares on December 31, 2023, with a total amount of 1.02 billion yuan (the B-share dividend is converted according to the median price of the US dollar to RMB announced by the People's Bank of China on the next working day of the resolution of the company's 2023 annual shareholders' meeting). The company's cash dividend for 2023 accounted for 46.07% of net profit attributable to company owners in the consolidated statement in 2023.
Products are ingenious, channels are actively expanded, and brand potential continues to improve. 1) Product: “Gold and silver craftsmanship” exquisite craftsmanship, product design “ingenuity”. Lao Fengxiang's unique gold and silver craftsmanship is exquisite. It has been selected as a national intangible cultural heritage to create exquisite jewelry; it has a complete industrial chain and large-scale manufacturing capacity from source procurement to design, production and sales. He established a processing base in Hainan and began operation in 2022, forming complementary interactions with the Dongguan production base to help the company enter the international market and achieve independent R&D, production and sales of gold and jewelry products. 2) Channel: “Five in One” marketing model, far-reaching marketing network layout.
By the end of 2023, it had a total of 5,994 domestic and overseas marketing outlets (including 15 overseas banks), a net increase of 385 for the whole year.
In 23Q4, the Laofengxiang Treasure Private Information Center was renovated and opened. It integrates functions such as high-end product sales and auctions, innovative technology product launches, display of the brand's historical and cultural heritage, hosting major events, and digital transformation pilots. It has become a landmark for the Lao Fengxiang brand in the central commercial area of Shanghai and a new IP for Haipai's high-end jewelry culture. In addition, we are actively promoting new sales methods such as webcasts, member stores, and talent visits to attract customer groups at different levels. 3) Brand: Based on the “100 Year Gold Brand”, continue to enhance brand potential. As a “100 year gold signature” in the industry, it has a unique brand culture. In 2023, the company used Lao Fengxiang's 175th anniversary as an opportunity to dig deeper into the cultural connotations of “classic” and “fashion” brands, organize a series of promotion activities, and enhance social influence.
Investment advice: The company has a strong brand and outstanding competitive advantage on the product and channel side, and revenue and profit are expected to grow rapidly.
In 2024-2026, the company is expected to achieve revenue of 824.42, 932.41, and 103,597 billion yuan, respectively; net profit to mother will be 26.29, 30.35, and 3.419 billion yuan, +18.7%, +15.5%, and +12.6% year-on-year, respectively. The PE corresponding to the closing price on April 29 is 15, 13, and 12 times, maintaining the “recommended” rating.
Risk warning: demand for terminals falls short of expectations, industry competition intensifies, marketing falls short of expectations, etc.