China Gold released its 2023 annual report: In 2023, it achieved revenue of 56.364 billion yuan, up 19.61% year on year; net profit to mother was 973 million yuan, up 27.20% year on year, after deducting net profit of 881 million yuan without return to mother, up 26.81% year on year. The diluted EPS was 0.58 yuan; the weighted average return on net assets was 13.61%, and the net operating cash flow was 1,577 billion yuan, up 32.14% year on year.
The company announced the 2023 profit distribution plan: based on a total share capital of 1.68 billion shares, it plans to distribute a cash dividend of 4.5 yuan (tax included) to all shareholders for every 10 shares, with a dividend payment rate of 77.66%.
Results for the first quarter of 2024: revenue for the first quarter of 2024 was 18.251 billion yuan, up 13.08% year on year; net profit to mother was 363 million yuan, up 21.09% year on year. Net profit after deducting non-return to mother was 369 million yuan, an increase of 33.21% over the previous year.
Brief review and investment advice:
1. The net number of stores increased by 615 in the full year of 2023, with a gross profit margin of 4.13% (+0.23pct), the company's revenue of 56.364 billion yuan in 2023 increased 19.61%, and net profit to mother of 973 million yuan increased 27.20%.
In 2023, the company's sales and production volumes of gold products were 129.73/128.69 tons, +3.96%/+3.08%, respectively. Among them, outsourcing production and processing/in-house production were 51.1/77.6 tons, each +10.58%/-1.32%.
(A) By sales model: ① Direct sales model: 2023 revenue of 32.935 billion yuan, up 15.41% year on year, accounting for 58.43% of total revenue; ② Distribution model: 2023 revenue of 23.10 billion yuan, up 26.08% year on year, accounting for 40.98% of total revenue.
(B) By category: ① Gold products: 2023 revenue of 55.485 billion yuan, up 20.09% year on year; ② k gold jewelry products: 2023 revenue of 356 million yuan, a year-on-year decrease of 26.51%; ③ Brand usage fee: 2023 revenue of 110 million yuan, up 40.67% year on year; ④ Management service fee: 2023 revenue of 841 million yuan, a decrease of 10.33% year on year.
There was a net increase of 615 stores for the full year of 2023. At the end of 2023, the number of terminal stores was 4,257 (4154 franchisees/103 direct-run stores): 998 new stores were added throughout 2023 (985 franchisees/13 direct-run stores), and 383 stores were closed (368 franchised stores and 15 direct-run stores).
2. 1Q24 net profit increased by 21%, product structure improved
The company's 1Q24 revenue was $18.25 billion (+13%), net profit attributable to mother of $360 million (+21%), with net profit of $370 million (+33%); of this, gross profit of $747 million (+16%), gross margin of 4.09 (+0.1pct), total period expenses of 180 million yuan (+18.82%), with a period expense ratio of 0.99% (+0.05Pct); gross profit - period expenses of $570 million (+15%).
Maintain judgment on the company. We believe that the company has a steady and high dividend rating (78% dividend rate in 2023, and the dividend ratio has increased for two consecutive years). At the same time, it has benefited from channel management optimization and the expansion of the trade fair model (the company held a New Year's fair in Shenzhen in January 2024, with sales volume of nearly 2 tons exclusively for new products), and optimized the gold repurchase system to enhance consumer stickiness, and channel and product drive enterprise development.
Update profit forecasts. Revenue for 2024-2026 is estimated at 674, 755, and 83.1 billion yuan, respectively; net profit to mother will be 1,182, 13.45, and 1,494 billion yuan, up 21%, 14%, and 11%, respectively. Refer to the 2024 valuation of the Gold, Jewelry & Diamond Cultivation Company, which is 18-22xPE in 2024, corresponding to a reasonable market value range of 212.74-26.02 billion yuan, and a reasonable value range of 12.66-15.48 yuan, maintaining the “superior to the market” rating.
Risk warning: market downturn, inventory management, increased market competition, franchise management, risk of gold price fluctuations.