Performance summary: 1Q24 achieved revenue of 4.850 million yuan/yoy -4.63%, month-on-month +15.28%, net profit of 435 million yuan/yoy -15.07% month-on-month, +132.82% month-on-month, net profit of 446 million yuan/yoy -2.74% without return to mother, +309.53% month-on-month, and non-financial profit and loss of 10.88 million yuan, mainly due to the 24Q1 decline in Dengkang Dental's stock price, confirming fair value change profit and loss of 19.21 million yuan. Cash flow from operating activities was 679 million yuan/yoy +3.10%.
The company's revenue fell 4.63% in 1Q24, mainly under pressure from the growth of department stores, supermarkets, and auto trade. By region, the Chongqing region achieved revenue of 4.746 billion yuan/yoy -4.57%; the Sichuan region included department stores and supermarkets, which achieved revenue of 101 million yuan/yoy -13.17%; the Hubei region included the supermarket business, which achieved revenue of 2.92 million yuan/yoy -79.04%. By business type, department stores/supermarkets/electrical/auto trade achieved revenue of 7.71/19.86/7.90/1,250 billion yuan respectively, with year-on-year changes of -5.26%/-6.90%/+4.69%/-5.83%, and gross margins of 73.0%/27.8%/19.2%/6.2%, respectively, with year-on-year changes of -0.88/+3.77/+0.57/-1.30pct, respectively. Judging from the exhibition store situation, the supermarket, electronics, and automobile trade business in Chongqing opened 1 new store. Among them, the electronics and automobile trade business closed 1 store, and the Hubei region closed 1 supermarket business. There were no remaining stores at the end of the first quarter.
Both gross margin and net net margin have improved, and expense ratios have remained stable. 1Q24's gross margin was 28.20% /+1.07pct, +2.64pct month-on-month, net profit margin 9.19% /+0.14pct after deducting non-return mother, and +6.60pct month-on-month. In terms of cost ratios, 1Q24's sales/management/R&D/finance expense ratios were 13.21%/4.23%/0.10%/0.33%, respectively, with year-on-year changes of +0.10/-0.54/-0.05/-0.35pct, respectively.
Completed the absorption and merger of the trading company group. On January 31, 2024, the company, the trading company group and the counterparty signed the “Delivery Agreement on the Absorption and Merger of Chongqing Department Store Co., Ltd. and Chongqing Trading Company (Group) Co., Ltd.”. The parties agreed to use January 31, 2024 as the delivery date for this transaction. From the date of delivery, all assets, liabilities, business, personnel and all other rights and obligations of the trading company group are transferred to the company.
Investment advice: The company's retail business is dominated by four major business formats. The department store and supermarket business have regional advantages in Chongqing. After the implementation of the mixed reform, the company's operating and management efficiency is expected to be further improved. With the reform of traditional business formats and the rapid rise of discount retail in the new business format, we expect the company's performance to grow. The company is expected to achieve net profit of 14.46/15.98/1,764 billion yuan in 24-26, with year-on-year changes of +9.9%/10.6%/10.4%, corresponding to PE of 8/8/7X on April 29, and the company's dividend ratio for 20-22 is 142.73%/153.23%/30.85%, respectively. Under high dividends, the valuation is low, and the “recommended” rating is maintained.
Risk warning: Consumer demand falls short of expectations, and showrooms fall short of expectations.