Incident: The company disclosed its 23 annual report and 24 quarterly report. 23 Annual revenue of 2.18 billion yuan/ -41%, net profit attributable to mother of 70 million/ -91%. 24Q1 revenue was 430 million yuan/ -40%, net profit to mother was 0.3 million/ -71%. Diamond jewelry is still in a phased adjustment cycle.
Revenue was under pressure during the downward cycle of the industry, but customer unit prices remained stable: the company's 23-year revenue was 2.18 billion yuan/ -41%. By channel, offline self-employment is 1.77 billion/-41%, joint ventures 180 million/ -35.6%, and online self-employment revenue is 230 million/ -43%. The downside of the industry is showing a decline in omnichannel. By product, proposal ring revenue is 1.70 billion/-41%, and wedding ring revenue is 450 million/ -37%. In terms of volume price, the number of orders placed by the company fell 38% year on year, and the customer unit price remained stable.
Gross margin was generally stable in '23, and the expense ratio dragged down profitability significantly.
Gross profit margin: The gross margin of the company in '23 was 68.9% /-1.4pct, of which the gross margin for marriage proposal rings and wedding rings was 70.2% /-1.6pct and 64.8% /-0.1pct, respectively. Despite the downturn in the industry, stable customer unit prices supported gross margins. The gross margin for 24Q1 was 65.8%, -4.0pct year on year. The decline in gross margin was mainly due to rising gold prices dragging down the gross profit margin of wedding ring products, compounded by an increase in the share of gold products.
Expense rate: The 23-year sales, management, R&D, and financial expense ratio was 55.0%, 7.0%, and 0.8%, compared with +16.4pct, +2.5pct, +0.5pct, and +0.2pct. Mainly due to the decline in income, expenses such as wages, salaries, depreciation and amortization are more rigid.
Net interest rate: The company's net profit in '23 was 70 million/ -91%, corresponding to a net interest rate of 3.5% /-16.4pct. Net margin for 24Q1 was 6.9%, an improvement over the previous quarter.
Actively adjust and optimize channels and gradually develop gold wedding products: in '23, the company optimized and closed 184 stores; by the end of '23, the company had 528 stores, a net decrease of 160. In the future, the company will continue to adjust the overall channel layout to enhance users' perception and experience of the brand. At the same time, the company set up a special gold team to focus on developing and launching wedding gold-themed hardware one-diamond sets to consolidate the brand's core competitiveness in the wedding market.
Profit forecasting and valuation: In '23, the optional consumption represented by diamonds was impacted, but as the leading brand for engagement rings, the company's brand power is still leading in the industry. We believe that in the downward cycle of the industry, the company actively responds to active adjustments, continuously optimizes channels, refines the brand's internal skills, and develops wedding gold products while adhering to the core concept of the brand. Actively pay attention to subsequent changes in the diamond industry and the performance of the company's gold wedding products. We expect the company to return a net profit of 250 million yuan or 410 million yuan from 2024-2025, maintaining a “recommended” rating.
Risk warning: the risk of continued weakness in consumption, the risk that the industry will continue to decline, and the performance of gold wedding products is weaker than expected