The company achieved operating income of 71.44 billion yuan in 2023, an increase of 13.4% over the previous year, and achieved net profit of 2.21 billion yuan, an increase of 30.2% over the previous year. The 24Q1 company's revenue and net profit to mother increased 4.4% and 12%, respectively, and revenue growth slowed slightly (presumably due to the high base for the same period last year and the impact of the sharp rise in gold prices in February-March on terminal consumption), but the profit side performed well. The company plans to pay a dividend of 1.02 billion, with a dividend rate of about 46.1%.
Offline channels are expanding steadily, and plans are being made to establish a sales company in Northeast China in 2024. By the end of 2023, there were 5,994 offline stores, with a net opening of 385, of which 7 were directly managed and 392 were franchised, surpassing the target of no less than 350 new Yinlou specialty stores and distribution outlets set in early 2023. The rapid pace of opening stores is expected to continue in 2024, and the company aims to open no less than 300 new stores throughout the year. While consolidating the basic market in the Yangtze River Delta, the company is speeding up the deployment of offline marketing networks in key metropolitan areas and emerging regions, and gradually increasing the sales share of South China and Southwest China. In 2023, the company completed the establishment of Laofengxiang Jewelry (Hubei) Co., Ltd. to promote business unification, standardization and rapid development. In 2024, it will focus on preparing Laofengxiang's sales company in Northeast China.
The product range is gradually being enriched, and cooperation with e-commerce platforms will be tested in 2024. In terms of retail business, the company continues to strengthen the promotion of “Treasure Gold” and “Fengxiang Lucky” themed stores to enhance its brand image. At the same time, the company will research, analyze, and formulate the company's online sales and operation standards for gold and silver jewelry, select suitable product categories, actively experiment with cooperation with e-commerce platforms, and accelerate the development of online and offline integration.
In 2023, the company's net cash flow from operating activities was 7.21 billion, a sharp increase of 648% year on year. The number of inventory turnover days decreased by 10 to 80 days year on year, and operational efficiency was further improved.
According to the annual report, in 2024, the company will further deepen the implementation of reform tasks in accordance with the goals and tasks of the “Double Hundred Action” and the “14th Five-Year Plan”, including: 1) continue to further expand the professional manager mechanism; 2) further carefully sort out and analyze the equity structure situation of enterprises at various levels of the company, and adopt appropriate methods to steadily advance the equity structure adjustments of relevant enterprises to resolve remaining issues; 3) promote the implementation of other reform initiatives and tasks in accordance with the third round of the “Double Hundred Action” plan. We believe that with the rejuvenation, modernization, and nationalization of gold and jewelry consumption, as well as the relative strength of gold prices, the company is expected to continue to benefit from the boom in the racetrack. We are also firmly optimistic about medium- to long-term growth capacity and the efficiency improvement space brought about by state-owned enterprise reforms.
According to the annual report and quarterly report, we adjusted the profit forecast and introduced the 2026 profit forecast. We expect earnings per share of 2024-2026 to be 4.91, 5.66, and 6.47 yuan (previously 5.28 and 6.18 yuan for 2024-2025), respectively. Referring to comparable companies, we will give a PE valuation 19 times in 2024, corresponding to a target price of 93.29 yuan, and maintain the “buy” rating.
Risk warning: Industry competition intensifies, terminal consumer demand weakens, gold price fluctuations affect terminal consumption, etc.