Incidents:
The company released its 2023 annual report and 2024 quarterly report.
Comment:
Performance grew steadily in 23 years. Revenue under the 24Q1 high base increased 18% year on year. In 2023, the company achieved operating income of 5.9 billion yuan, an increase of 33.56% year on year, net profit to mother of 333 million yuan, an increase of 67.41% year on year, after deducting net profit of 306 million yuan from non-return to mother, an increase of 71.93% year on year.
In 2023, Fianna's business calculated goodwill impairment provisions of 39.43 million yuan. In terms of profitability, the company achieved a gross profit margin of 26.07% in '23, a year-on-year decrease of 4.11pct, a net profit margin of 5.59%, and a year-on-year increase of 0.95pct.
In terms of cost ratio, the company's sales expense rate/management expense rate/R&D expense ratio in 2023 were 14.03%/2.13%/1.06% respectively, down 3.49/ 0.07/0.29pct year-on-year respectively. In 2024Q1, the company achieved operating income of 1,796 billion yuan, an increase of 17.87% year on year, and net profit to mother of 131 million yuan, an increase of 5.47% year on year. In terms of profitability, 2024Q1's gross margin was 24.92%, down 3.11 pct year on year, and net margin was 7.35%, down 0.99 pct year on year. 2024Q1's sales expense ratio, management expense ratio, and R&D expense ratio decreased by 1.13/ increased by 0.47/ decreased by 0.09pct, respectively, over the same period last year, and overall cost control continued to be optimized.
Traditional gold products are booming, and the FION brand has been renewed and upgraded
By product, revenue from fashion jewelry products in 2023 was 2,989 billion yuan, up 20.43% year on year, gross profit margin was 30.67%, down 4.60 pct year on year; revenue from traditional gold products was 2.65 billion yuan, up 56.75% year on year, gross profit margin was 8.73%, down 0.5 pct year on year; leather goods revenue was 371 million yuan, up 14.41% year on year, and gross profit margin was 63.54%, which was basically the same year on year. Combining intangible heritage craftsmanship and modern aesthetics, Chao Hongji continued to enhance its product strength. In '23, it launched a major new national style product such as “Filigree Fengyu Bridge”. The fashion gold category contributed significantly to gross profit, and sales increased dramatically. C? vol and VENTI continue to advance the development of cultivating diamond products, C? The new vol store opened in Jing'an, Shanghai at the end of April, and the offline image store was further expanded. The brand image upgrade was officially launched in FION23, further consolidating the mentality of a heavy brand. On the membership side, in 2023, member repurchases contributed more than 50% of total revenue. The main brand force accounted for 85% of the post-80s, post-90s, and post-00s people, while the share of post-95 and post-00s increased markedly.
Franchise expansion is being actively promoted. The 24-year plan is to increase net 300 branch channels. In 2023, the company's own revenue was 3.258 billion yuan, up 14.53% year on year, and franchise agent revenue was 2,481 billion yuan, up 67.52% year on year, accounting for an increase of 8.54% to 42.06% of revenue.
The company had a net increase of 241 jewelry stores throughout the year, with a net increase of -50/+291 of its own-operated/franchised stores respectively. As of the end of 2023, the number of jewelry stores was 1,399, of which 274/1125 were own/franchised stores respectively. The company uses the local resources of new and old agents to accelerate penetration, and the franchise business expanded smoothly in 23 years. The plan is to net increase the number of affiliate stores by more than 300 in 2024, and the number of stores is expected to reach 2,000 by 2025.
Investment advice and profit forecasting
The company is positioned as a multi-brand operator of high-end fashion consumer goods. It has three major brands: “CHJ Chao Acer”, “VENTI” and “FION Fianne”. The main brand, Chao Acer, has accelerated channel expansion and continuously promoted the fashionization of gold jewelry. We expect the 2024-2026 EPS to be 0.45/0.53/0.60 yuan, and the corresponding PE will be 13/11/10x, maintaining the “buy” rating.
Risk warning
The risk of expanding stores falling short of expectations; the risk of increased competition in the industry.