Matters:
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue/net profit without return to mother of 233.5/15.3/1.40 billion yuan, YoY +16.8%/+19.1%/+21.0%; 24Q1 achieved revenue/net profit/net profit after deducting non-attributable net profit of 54.9/38/330 million yuan, YoY +12.4%/+13.9%/+11.1%.
Commentary:
Traditional business trends are improving, and online channels are performing well. 1) In 23 years, the company's traditional core business achieved revenue of 9.14 billion yuan/YoY +7.5%, and revenue of writing tools/student stationery/office stationery of 22.7/34.7/3.51 billion, +4.8%/+8.6%/+8.9% over the same period last year. On the product side, the company optimized the existing structure and the development of new products, exploited potential linkages with popular products, and effectively improved the terminal arrival rate and the survival rate of new products through differentiation and focus on popular models.
On the channel side, the company promoted an omnichannel layout, and digital tools enabled single store quality improvement and effective single product delivery. Online channels such as Pinduoduo and Doukuei grew rapidly. Chenguang Technology achieved revenue of 860 million yuan, an increase of 30% over the previous year. 2) In 24Q1, the company's writing tools/student stationery/office stationery revenue was 5.6/85/90 million, compared with +15.7%/+17.1%/+6.4%. The business continued its 23-year growth trend. Among them, the growth rate of office stationery was slow or customer demand from major enterprises was still relatively weak. 24Q1 Chenguang Technology's revenue was 250 million/YOY +32.7%.
Offline traffic has resumed, and major retail stores have turned losses into profits. 1) In '23, the revenue of major retail stores was 1.34 billion yuan/YoY +51.0%, of which Jiumu Grocery Company achieved revenue of 1.24 billion yuan, +52.6% year-on-year; net profit of 0.3 billion yuan, which successfully turned a loss into a profit. During the period, the company maintained a relatively rapid exhibition process. By the end of '23, the company had 659 major retail stores, including 618 Jiumu Grocery Store (417/201 directly managed, with a net opening of 80/49); 41 Chenguang Living and 10 stores closed. 2) In 24Q1, the revenue of major retail stores was 370 million/YoY +23.5%. Among them, Jiumu Grocery Store continued its growth trend, with revenue +25.1% to 350 million. By the end of the first quarter, the company had 678 major retail stores, including 639 Jiumu Grocery Store (435/204 directly managed); and 39 Chenguang Living Center.
Colipu accelerated customer and product development, and the 24Q1 growth rate slowed slightly. 1) In '23, Colipu actively expanded its core customers and promoted the development of MRO industrial products and marketing gift categories, achieving revenue of 13.31 billion yuan, +21% year over year; net profit of 40 million yuan, +8% year over year. 2) In 24Q1, Colipu achieved revenue of 2.95 billion yuan, +11.6% year-on-year. The growth rate was slightly slower than in '23, but we think the long-term positive trend will not change.
Profitability is steady, and the fee control effect is good. 1) In '23, the company achieved a gross profit margin of 18.9%, which remained stable; on the cost side, the company's sales/management/financial expense ratios were 6.6%/3.5%/-0.2%, respectively, and -0.2/-0.5/-0.03pct year on year, with a comprehensive impact on the net interest rate of +0.1 pct to 6.5%. 2) In 24Q1, the company achieved a gross profit margin of 20.2%, +0.5pct/month-on-month; on the cost side, the company's sales/management/financial expense ratios were 7.4%/3.9%/-0.3%, respectively, and +0.4/-0.02/-0.1pct year-on-year, with a comprehensive impact on the net profit margin of +0.1pct to 6.9%.
Investment advice: The company's core business advantage is stable, and the revenue contribution of Colipu and major retail stores continues to increase. I am optimistic about the continuation of the company's performance growth. Considering that the demand side needs to recover further, we expect net profit to be 18.04/21.55/ 25.18 billion yuan for 24-26 (the value of 1,963/2,346 billion yuan before 24/25), corresponding to PE20/17/14X. Referring to the absolute valuation method, the target price was 47.2 yuan/share to maintain the “strong recommendation” rating.
Risk warning: offline recovery falls short of expectations, traditional core businesses are facing transformation challenges, industry competition is intensifying, etc.