Incident: The company disclosed its 23 annual report and 24 quarterly report. The annual dividend ratio is 77.66%.
23 Full year: Revenue of $56.36 billion/ +20%, net profit attributable to mother of 970 million/ +27%, net profit after deducting non-attributable net profit of $880,000/ +27%.
24Q1: Revenue of 18.25 billion/ +13%, net profit attributable to mother of 360 million/ +21%, net profit of 370 million/ +33% after deducting non-return to mother.
23. The upward trend in gold prices was compounded by an explosion in gold demand, which drove the company to achieve relatively rapid growth:
By product, gold products are 55.49 billion/+20%, K gold jewelry category is 390 million/ -27%, brand usage fee is 110 million/ +41%, and management service fee is 80 million/ -10%. Among them, gold products were mainly driven by gold prices, and sales volume (tons) increased 4.0% year over year in '23.
By channel, the direct sales model is 32.94 billion/+15%, and the distribution model is 23.10 billion/+26%.
The gross margin increased, and the superimposed expense ratio was steady, and profitability continued to improve:
Gross profit margin: The gross profit margin for the full year of '23 was 4.1% /+0.2pct; of these, the gross margin for gold products was 3.7% /+0.4pct. By channel, the gross margin of the distribution model was stable at 5.9% /-0.1 pct; the gross margin of direct management improved by 2.8% /+0.3 pct, which we believe mainly benefited from the increase in gold prices.
Expense rate: The total cost rate for the 23-year period was 1.30% /-0.08pct. Under the rapid expansion of main revenue, operating leverage was positive, and the sales expense ratio declined. The cost rate during the 24Q1 period was 1.1% /+0.02pct, which remained steady.
Net interest rate: Net interest rates for 23 and 24Q1 were 1.73% /+0.1pct and 1.99% /+0.13pct, respectively.
Under the Golden Track boom, it is expected to maintain a relatively fast pace of opening stores: the company's channel side is mainly franchising, the company has increased its policies and financial support for franchisees, and franchise stores will maintain rapid expansion. At the end of '23, the number of franchised and directly-managed stores was 4154, +617, and 103, or 2, respectively. We believe the company will continue to expand at a rapid rate of channel expansion in 24 years. On the online side, the company sold 4.50 billion yuan/ -0.1% online in '23, but its gross margin increased 0.5 points to 3.6% year over year. With the company's e-commerce national headquarters in Changsha, self-operated and authorized online stores go hand in hand, while strengthening and improving the cultivation of live streaming, online follow-up is expected to gain momentum.
Profit prediction and valuation: Gold prices fluctuated upward in Q1, especially since March, which suppressed demand for gold jewelry to a certain extent, but the surge in safe-haven demand has driven a sharp rise in investment gold consumption. According to data from the China Gold Association, consumption of gold jewelry/gold bars and coins in Q1 was -3%/+27%, respectively. The company has strong product strength in investing in gold bars and gold jewelry. Stable Q1 revenue and improved gross margin drove performance off to a good start. In the medium to long term, as a central gold and jewelry leader, the company maintains rapid channel expansion under the franchise model and establishes a “Product Work Leading Group” to strengthen the product upgrade strategy. Revenue and profit are expected to maintain a relatively rapid growth rate. We expect the company to achieve net profit of 12.2 or 14.7 yuan in 24-25. The current stock price corresponds to the 24-year P/E of 15x, giving the company a “highly recommended” rating.
Risk warning: consumer demand falls short of expectations; channel expansion falls short of expectations; risk of gold price fluctuations