Key elements of the report
The company released its 2023 annual report. In 2023, the company achieved revenue of $56.364 billion (YoY +19.61%), net profit attributable to mother of 973 million yuan (YoY +27.20%), and net profit of 881 million yuan (YoY +26.81%) after deducting non-return to mother net profit. In addition, the company plans to distribute cash dividends of 4.50 yuan (tax included) for every 10 shares to all shareholders.
Investment highlights:
Thanks to increased sales volume of gold products and rising gold prices, the 2023 performance grew steadily. In 2023, the company achieved revenue of $56.364 billion (+19.61% year over year), mainly due to increased sales of gold products and rising gold prices. Net profit to mother was 973 million yuan (+27.20% year over year), after deducting net profit of 881 million yuan (+26.81% year over year). Among them, 2023Q4 achieved revenue of 15.51 billion yuan (YoY +31.62%), net profit attributable to mother of 233 million yuan (YoY +53.71%), and net profit of 220 million yuan (YoY +90.39%).
The net interest rate increased slightly, and the cost control was good. In 2023, the company's gross margin increased 0.23 pcts year on year to 4.13%; sales/management/ R&D/finance expense ratios were 0.88%/0.33%/0.05%/0.04%, respectively, -0.07/+0.02/-0.01/-0.01 pct year on year, with good cost control; net profit margin increased slightly by 0.10 pcts year on year to 1.73%.
Strengthen product development and design, and the number of stores is growing rapidly. (1) Product: The company continues to strengthen R&D and design, integrate 5D, 5G, ancient methods and other processes to steadily create high-value-added products rich in brand characteristics, strengthen brand marketing, and continue to enhance the advantages of the “China Gold” brand. Currently, the company has created new 18K gold inlay and “5G handmade gold” gold diamond series products such as “Highlight Now”, “In the Name of Love”, “Mulan”, and “Huacai”, and held a brand-nurturing diamond product launch conference on June 18, 2023 on the JD platform, which is widely favored by consumers. In 2023, revenue from gold and jewellery products was $55.485 billion, +20.09% year-on-year. (2) Channel: In 2023, the company's direct sales/distribution revenue was 329.35/23.10 billion yuan respectively, +15.41%/+26.08%, respectively. Among them, the company's franchise channel achieved contrarian growth in business performance and number of stores. By the end of 2023, the number of stores opened by the company was 4,257, a net increase of 615 compared to the end of 2022 (net decrease of 2 direct-run stores and a net increase of 617 franchised stores).
Profit forecast and investment advice: As a large gold and jewelry enterprise with a central enterprise background, the company relies on core gold products, continuously introduces new products, and caters to the trend and enters the diamond cultivation circuit. It is expected to create a second growth curve in the future. According to adjusted profit forecasts based on the latest operating data, the company's EPS for 2024-2026 is expected to be 0.72/0.86/0.98 yuan/share (EPS for 2024-2025 was 0.70/0.82 yuan/share, respectively), and PE corresponding to the closing price on April 29, 2024 is 16/13/12 times, respectively, maintaining a “buy” rating.
Risk factors: macroeconomic downturn risk, increased market competition risk, risk of large fluctuations in raw material prices.