Core views:
Incident: The company disclosed its annual report for '23 and its quarterly report for '24. (1) In '23, the company achieved revenue of 16.290 billion yuan, an increase of 46.52% over the previous year, achieved net profit of 1,316 billion yuan, an increase of 20.67% over the previous year, and realized net profit withheld from non-mother of 1,268 billion yuan, an increase of 23.64% over the previous year. (2) The 24Q1 company achieved revenue of 5,070 billion yuan, a year-on-year increase of 23.01%, achieved net profit of 341 million yuan, a year-on-year decrease of 6.61%, and realized net profit without deduction of 336 million yuan, a year-on-year decrease of 5.70%. (3) The company plans to pay a cash dividend of 6.5 yuan (tax included) for every 10 shares.
Changes in product structure have put pressure on gross margins, and cost control capabilities continue to be optimized. The company's gross margin in '23 was 18.14%, down 2.64pp year on year, mainly due to the decline in sales share of high-margin products. The fee rate for the 23-year period was 6.55%, a year-on-year decrease of 1.01pp, mainly due to a year-on-year decrease of 0.93pp to 5.80% in sales expenses and a 0.14pp to 0.02% year-on-year increase in financial rates, mainly due to an increase in interest on short-term loans and gold leasing expenses.
The gold category continues to grow rapidly, and the inlay category has yet to see a recovery trend. In '23, pure gold products achieved revenue of 13.720 billion yuan, an increase of 62.01%. Revenue from mosaic products was 918 million yuan, a year-on-year decrease of 29.4%. The rise in gold prices drove the gross margin of pure gold jewelry to increase 0.48pp to 8.66% year on year. Brand royalty revenue was 862 million yuan, up 38.24% year over year.
Offline store expansion in 2023 exceeded expectations, and online channels performed well. According to the annual report for '23, as of the end of '23, the company had a total of 5106 terminal stores (4775 franchisees+331 self-operated), a net increase of 490 over the end of '22. In '23, online channels achieved revenue of 2,508 billion yuan, an increase of 62.25% over the previous year, accounting for 15.4% of online revenue. Among them, Tmall, JD, and Douyin achieved revenue of 1.08 billion yuan, 803 million yuan, and 329 million yuan respectively.
Profit forecast and investment advice: The company's net profit for 24-26 is estimated to be 15.2, 17.01 billion yuan, and 19.01 billion yuan, respectively, with year-on-year growth rates of 15.4%, 12.8%, and 11.2%, respectively. Referring to the industry average valuation, the company is given a reasonable value of 20.78 yuan/share for 24 years, giving it a “buy” rating.
Risk warning: The macroeconomic downturn inhibits the release of demand for optional consumption; market competition intensifies, brands are opening stores at an accelerated pace to seize the market; small and medium-sized brands are clearing faster than expected.