Incident: The company released its 2023 annual report and 2024 quarterly report: In 2023, the company achieved operating income of 5.09 billion yuan, +33.56% year over year; net profit to mother was 333 million yuan, +67.41% year over year; net profit after deducting non-return to mother was 306 million yuan, +71.93% year over year. With 2024Q1, the company achieved operating income of 1,796 million yuan, +17.87% year over year; net profit to mother of 131 million yuan, +5.47% year over year; net profit after deducting non-return to mother of 129 million yuan, +5.37% year on year.
Revenue from gold products increased, and profitability fluctuated: by product, the company's revenue from fashion jewelry products/traditional gold products/leather goods/other products/agency brand licensing and franchise services in 2023 was 29.89, 22.65, 3.71, 0.36, and 214 million yuan, respectively, +20.4%/+14.4%/+7.2%/+68.2%; the gross margins of fashion jewellery/traditional gold products/leather goods were 30.67%/8.73%/63.54% year on year, -4.60/-0.50 /- 0.01pct. By sales model, the company's self-operated/franchise agent revenue in 2023 was 32.58 billion yuan and 2,481 billion yuan respectively, +14.53%/+67.55% compared with the same period last year.
Continue to expand the omni-channel layout and use the franchise model to accelerate offline channel expansion: With years of channel investment and construction, the company's various brands have deployed more than 1,700 outlets across the country and the Asia-Pacific region, including independent stores and high-end fashion consumer goods channels such as shopping centers, department stores, airports, etc., and online channels through self-built operations and third-party platforms such as Tmall, JD, and Vipshop. The company's Chao Hongji jewelry brand strengthened channel expansion through the franchise model and set a goal of reaching 2,000 stores by 2025. In 2023, the company's jewellery segment increased by a net of 241 stores.
Investment advice: As a high-end jewelry fashion brand in China, Chao Hongji caters to market hot spots with gold as a starting point, accelerates market expansion through the franchise model, continues to gain strength on the marketing side and product side, and its performance is expected to grow rapidly. We expect the company's net profit to be 393/456/522 million yuan in 2024-2026, respectively, and the corresponding PE is 14x/12x/11x, respectively, to maintain the “incremental” rating.
Risk warning: The price of gold fluctuates greatly, market competition intensifies, and terminal store expansion falls short of expectations.