Incidents:
Lao Fengxiang released the 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 71,436 billion yuan/ +13.37%, net profit of 2,214 billion yuan/ +30.23%, net profit after deducting non-return to mother of 2,156 million yuan/ +24.83%, and non-recurring profit and loss of 59 million yuan, mainly from government subsidies, and plans to distribute a cash dividend of 19.5 yuan (tax included) for every 10 shares. 2023Q4 achieved revenue of 9.370 billion yuan/ -1.08%, net profit of 250 million yuan/ -27.41%, net profit of 176 million yuan/ -49.94% after deducting non-return net profit. 2024Q1 achieved revenue of 25.630 billion yuan/ +4.36%, net profit of 802 million yuan/ +12%, net profit of non-return to mother of 835 million yuan/ +13.82%.
Comment:
Gold continues to be booming, and revenue growth is steady. In 2023, the company's revenue was 71,436 billion yuan/ +13.37%, by product: 1) jewelry revenue of 58,136 million/accounting for 81.38%/+15.44%; 2) pen revenue of 224 million/accounting for 0.31%/+10.22%; 3) handicraft sales revenue of 58 million/accounting for 0.08%/-37.16%; 4) gold trading revenue of 12.750 million/accounting for 17.85%/+5.53%; 5) trade revenue of 0.65 million/accounting for 0.09%/-41.56%; 6) Other business revenue of 203 million/accounting for 0.28%/+43.24%. Look at the sales model for jewelry and pen processing products by: 1) wholesale revenue of 54.304 billion/ accounting for 76.02%/+14.35%; 2) retail revenue of 4.114 billion/ accounting for 5.76%/+29.40%. In 2023, the company's gold sales fell by 1.84%. The company's revenue growth depended deeply on the rise in gold prices and the continued boom in gold consumption.
The cost ratio performance is stable, and the scale effect is obvious. The company's expense ratio in 2023 is 2.41% /+0.08pct, of which: 1) sales expenses of 1,054 million yuan/ +27.13%, sales expense ratio of 1.48% /+0.16pct; 2) management expenses of 490 million yuan/ +21.81%, management expense ratio 0.69% /+0.05pct; 3) R&D expenses of 37 million yuan/ +16.85%, R&D expenses rate 0.05% /+0pct; 4) financial expenses of 141 million/ -31.17%, financial expenses ratio 0.20% /- 0.13pct
Investment advice: Lao Fengxiang is a century-old domestic gold jewelry brand. With its deep historical heritage, product design that closely follows trends, and an extensive channel network, it is expected to achieve a steady increase in business scale. Considering the impact of large fluctuations in gold prices on terminal consumption and channel delivery, the profit forecast is adjusted. Revenue for 2024-2026 is estimated to be 80.834 billion/ 90,902 billion/ 101,683 billion, respectively, and net profit to mother will be 2,578 billion/ 2,917 billion/ 3.284 billion, respectively. The corresponding PE is 16 times/14 times/12 times, respectively. Maintain a “buy” rating.
Risk warning: Market competition intensifies; store expansion falls short of expectations; gold prices fluctuate; performance forecasts and valuation judgments fall short of expectations.