Key elements of the report:
On April 29, 2024, the company released its 2023 annual report and 2024 quarterly report.
Investment highlights:
Net profit to mother in '23 was +30% year-on-year, and the 24Q1 performance grew steadily. In 2023, the company achieved revenue of 71,436 billion yuan (YoY +13.37%), net profit attributable to mother of 2,214 billion yuan (YoY +30.23%), and net profit not attributable to mother of 2.156 billion yuan (YoY +24.83%). In addition, the company plans to distribute a dividend of 19.50 yuan (tax included) to all shareholders for every 10 shares, for a total amount of 1,020 billion yuan. 2024Q1, the company achieved revenue of 25.630 billion yuan (+4.36% year over year) and net profit to mother of 802 million yuan (+12.00% year over year), with steady growth in performance.
Jewellery revenue grew steadily, with a net increase of 385 stores throughout the year. Product side: In 2023, the company's jewelry revenue was 58.136 billion yuan (+15.44% year over year), and gold trading revenue was 12.750 billion yuan (+5.53% year over year). Channel aspect: In 2023, the company insisted on adhering to the “five in one” three-dimensional marketing model for self-operated bank building construction and joint ventures, general distribution, dealers and specialty stores, and actively expanded channels. By the end of 2023, Lao Fengxiang had a total of 5,994 marketing outlets (including 15 overseas banks), a net increase of 385 over the end of 2022.
Among them, there were 187 self-operated Yinlou outlets and 5,807 franchise stores, a net increase of 392.
Profitability increased, and the expense ratio was relatively stable during the period. In 2023, the company's gross margin was +0.72 pct year on year to 8.30%, and the net margin was 4.17% (+0.57 pct year over year). In terms of expense ratios, the company's sales expense rate/management expense rate/financial expense rate/R&D expense ratio were 1.48%/0.69%/0.20%/0.05%, respectively, +0.16/+0.05/-0.12/+0.00 pcts year-on-year, respectively. The increase in sales expense ratio and management expense ratio was mainly due to the increase in wages and social security and welfare expenses for sales and management personnel of the company's subsidiaries. Furthermore, the gross margin/net margin of 2024Q1 was 8.37%/4.11%, respectively, up 0.35/0.22 from the previous year Each pct; the cost rate declined steadily. The 2024Q1 company's sales/management/finance/R&D expenses ratio was -0.17/-0.12/-0.02/+0.01 pct to 1.25%/0.49%/0.23%/0.04%, respectively.
Profit forecasting and investment suggestions: With process breakthroughs and design innovations, the company continues to launch new products with high added value, and gross margin is expected to increase further. Against the backdrop of the wave of state-owned enterprise reform, the company's “three-year action plan” will gradually be implemented in the future, which is expected to be revitalized. We adjusted the profit forecast based on the latest operating data. We expect the company's 2024-2026 EPS to be 4.87/5.54/6.32 yuan/share (the 2024-2025 EPS will be 5.01/5.71 yuan/share, respectively), and the PE corresponding to the closing price on May 6, 2024 will be 16/14/12 times, respectively, maintaining a “buy” rating.
Risk factors: the risk of macroeconomic downturn, the risk of large fluctuations in gold prices, and the risk of increased industry competition.