Chao Hongji released its 2023 report: It achieved revenue of 5.9 billion yuan for the full year of 2023, an increase of 33.56%; net profit to mother was 333 million yuan, up 67.41% year on year, and net profit after deducting non-return to mother was 306 million yuan, an increase of 71.93% year on year. The diluted EPS was $0.38; the weighted average return on net assets was 9.33%, and the net operating cash flow was 615 million yuan, an increase of 48.66% over the previous year. 2023 Distribution Plan: Based on the share capital of 889 million shares, a cash dividend of 2.5 yuan (tax included) will be distributed to all shareholders for every 10 shares. At the same time, according to the company's “Notice on the 2024 Mid-Term Cash Dividend Plan”, it is planned to pay an interim dividend in '24. Results for the first quarter of 2024: revenue for the first quarter of 2024 was 1,796 million yuan, up 17.87% year on year; net profit to mother was 131 million yuan, up 5.47% year on year; net profit after deducting non-return to mother was 129 million yuan, up 5.37% year on year. Brief review and investment suggestions: 1. In 2024, franchise agent revenue increased 68% year-on-year, and the target for 2024 was a net increase of 333 million yuan (+67.41%) of the 300 Mengdian companies, including impairment loss of goodwill of -40 million yuan; considering that the company calculated goodwill impairment losses of -80 million yuan in 2022, if the impact of goodwill impairment is excluded, the net profit growth rate to the mother is 33%. By channel, in 2023, ChaoAcer's own revenue was 3.258 billion yuan, up 15% year on year; franchise agent revenue was 2,481 billion yuan, up 68% year on year, of which agency brand license fees and franchise service revenue was 214 million yuan, an increase of 68% year on year. By category, ① fashion jewelry: 2023 revenue was 2.99 billion yuan, up 20.4% year on year, gross margin was 30.7% year on year, -4.6pct year on year, accounting for 50.7% of total revenue; ② traditional gold jewelry: 2023 revenue was 2.26 billion yuan, up 56.8% year on year, gross margin was 8.7%, -0.5 pct year on year, accounting for 38.4% year on year; ③ leather goods: 2023 revenue was 370 million yuan, up 14.4% year on year, gross margin was 63.5% year on year, -0.01pct, accounting for 6.3% of total revenue. Looking at the number of stores, ① net increase: in 2023, there was a net increase of 241 in the company's jewelry stores, with a net increase of 291/50 of each; ② As of the end of December 2023, the company had 1,399 jewelry stores, including 274/1125 own/franchised agents; ③ Looking at the subregion, the East China region/other regions each had a net increase of 87/154. The company aims to increase the net number of stores by 300 in 2024, and has also set a goal of reaching 2,000 stores by 2025. The jewelry division's ROE continues to improve, and the brand's potential is rising. Looking at the jewelry division, revenue for 23 years was 5.5 billion yuan (+35%), net profit of 360 million yuan (+36%), and ROE 14.3% (+2.97pct). We believe that under franchise expansion, turnover will drive ROE increase, and at the same time, we are optimistic that the franchise leverage effect will be further reflected in 24 years. Looking at the leather goods division, in '23, women's bags earned 375 million yuan (+15%), and net profit was $15 million (-36%).
2. 1Q24 revenue +18%, net profit to mother +5%
1Q24's revenue was 1.8 billion yuan (+18%), net profit attributable to mother was 131 million yuan (+5.47%), net profit of not attributable to mother was 128 million yuan (+5.37%); of which gross profit was 450 million yuan (+4.8%), gross profit margin 24.9% (-3.1 pct), period expenses of 260 million yuan (+4%), and a period expense ratio of 14.57% (-1.9pct).
Update profit forecasts. The company's revenue for 2024-26 is estimated at 72.0/85.0/9.64 billion yuan each, and net profit to mother of 444/5.23/592 million yuan, respectively. Considering that the company still has high room to expand its stores and increase the company's ROE, 14-18xPE in 2024 corresponds to a reasonable market capitalization range of 62.21 to 7.999 billion yuan and a reasonable value range of 7.0-9.0 yuan, maintaining the “superior to the market” rating.
Risk warning: impairment of goodwill, impairment of inventory, franchise management, market slump.