Incident: The company achieved revenue of 4.850 billion yuan in 2024Q1, -4.63% year-on-year, net profit to mother of 435 million yuan, -15.07% year-on-year, and net profit of 446 million yuan after deduction, or -2.74% year-on-year.
Revenue from the main business declined, and the number of stores remained the same as at the beginning of the year. 2024Q1's department store/supermarket/electrical/auto trade revenue was 7.71/19.86/7.90/1,250 billion yuan, compared with -5.26%/-6.90%/+4.71%/-9.68%. The decline in the company's revenue was mainly related to factors such as the high post-epidemic base in the same period last year and intense market competition this year. As of 2024Q1, the company had 281 operating outlets according to the business format, including 50 department stores (0 open 0), 152 supermarkets (close 1), 41 electrical appliances (close 1 open 1), and 38 auto trade businesses (close 1 open 1).
Malaysia's investment income declined year-on-year due to a high base, and profits from the main business increased slightly. 2024Q1 achieved investment income of 166 million yuan, a year-on-year decline of 7.51% in the same period last year under a high consumer finance business profit base. The profit and loss from fair value changes due to falling stock prices of Dengkang Dental invested by 2024Q1 was -192,109 million yuan. After deducting the impact of changes in income from investment in China and Malaysia, the main retail business of 2024Q1 achieved profit of about 280 million yuan, an increase of 0.31% over the previous year.
Cost reduction and efficiency led to an increase in gross margin and a decrease in cost ratio. 2024Q1's gross margin was 28.20%, +1.07pct year on year, and the sales/management/R&D expenses ratio was 13.21%/4.23%/0.10%, respectively, and +0.09/-0.54/-0.05pct year on year. The company continues to improve the operating capacity of the “six major stores”, promote cost reduction and efficiency, and gradually improve operating efficiency.
Investment advice: The company's absorption and restructuring have been fully completed, and operational efficiency is expected to be further improved. The company's location advantage is obvious, the leading position is stable, and the value is outstanding. We anticipate 2024-2026 net profit of 14.5/15.7/1.72 billion yuan, corresponding to PE 8.1/7.4/6.8X, maintaining the “increase” rating.
Risk warning: the risk of macroeconomic fluctuations; the risk that market competition will increase the risk; the immediate growth rate of the consumer finance business will fall short of expectations.