Key points of investment:
The company announced its 2023 annual report and 2014 quarterly report, and the results were in line with expectations. According to the company's announcement, 1) For the full year of 2023, the company achieved revenue of 71,436 billion yuan, a year-on-year increase of 13.37%, net profit attributable to shareholders of listed companies of 2,214 billion yuan, an increase of 30.23% over the previous year, and shareholders belonging to listed companies withheld non-net profit of 2,156 billion yuan, an increase of 24.83% over the previous year. 2) The company's revenue for the first quarter of 2024 was 25.63 billion yuan, up 4.36% year on year. Net profit attributable to shareholders of listed companies was 802 million yuan, up 12% year on year, and non-net profit attributable to shareholders of listed companies withheld 835 million yuan, up 13.82% year on year.
Domestic and overseas channels are actively expanding, and the jewelry business continues to grow. According to the company's announcement, by the end of 2023, the company had a total of 5,994 domestic and overseas marketing outlets (15 overseas banks), a net increase of 385 for the whole year. Among them, there are 187 self-operated outlets and 5,807 franchise stores, -7/+392, respectively. The company vigorously promoted the market layout of “Treasure Gold” and “Fengxiang Lucky Story” theme stores, and upgraded the theme image of the new retail store. In addition, the company actively promotes new sales methods such as webcasts, member stores, and talent visits to attract customer groups at different levels. In 2023, thanks to a recovery in consumption and increased consumer demand for gold and silver jewelry, the company's jewelry business continued to grow, driving revenue growth. By product, sales revenue for pen, jewelry, gold trading, and handicraft sales in 23 years was 2.24/581.36/127.50/0.58 billion yuan, respectively, +3.66%/+15.44%/+5.53%/-37.16% compared with the same period last year.
Operating leverage continues to show, and profitability is steadily increasing. In 2023, the company's overall gross profit margin was 8.3%, up 0.72 pct year on year, and the net profit margin to mother was 3.1%, up 0.4 pct year on year. In 24Q1, the overall gross profit margin was 8.37%, up 0.35pct year on year, and the net profit margin to mother was 3.13%, up 0.21pct year on year. The company's expense ratio for the 23-year period was 2.41%, with a year-on-year increase of 0.08pct. Among them, sales/management/development/finance expenses were 1.48%/0.69%/0.05%/0.20%, respectively, and +0.16pct/+0.05pct/0pct/-0.13pct year-on-year. The increase in the marketing and management expense ratio is mainly due to the increase in sales, managers' wages, and social security benefits expenses of the company's subsidiaries. 24Q1 benefited from scale effects and operating leverage. The company's period expense ratio was 2.01%, down 0.29pct year on year. Among them, sales/management/ R&D/finance expenses were 1.25%/0.49%/0.04%/0.23%, respectively, and -0.17pct/ -0.11pct/+0.01pct/-0.02pct.
Deeply cultivate product development to seize new consumption growth points, and stabilize dividends to enhance shareholder returns. In 2023, the company launched a series of products such as “Dragon Love Honey” pure gold and jadeite jewelry, leading the domestic consumer trend. Its “China” brand is co-branded with famous brands such as the British Museum and a major cultural and creative company to explore brand IP and IP commercialization, and transform it into a two-way IP model for licensors. In 2023, the company applied for 232 patents, including 4 patent applications for inventions. By the end of '23, the company had 25 invention patents, and a total of 822 patents were effectively authorized. In addition, the company announced the 2023 cash dividend distribution plan. It plans to distribute a dividend of 19.50 yuan (tax included) for every 10 shares to all shareholders, with a total amount of 1,020 billion yuan, with a dividend distribution ratio of 46.07%.
Maintain a “buy” rating. Lao Fengxiang has an excellent state-owned background, high quality and balanced layout on the channel side. Front-end stores, product upgrades, and a series of product co-names have broken the circle to promote product systematization. Continue to push forward equity reform, bind the interests of major dealers, and be optimistic about steadily advancing the goals of the three-year action plan. We maintain our profit forecast. We expect net profit to be 25.57/2,803 billion yuan for 2024-2025, respectively, and an additional net profit of 3,015 billion yuan for 26 years, corresponding to PE 16/14/13 times, respectively, to maintain a “buy” rating.
Risk warning: Gold prices fluctuate, store expansion falls short of expectations, and consumption recovery falls short of expectations.