Incident: Chenguang Co., Ltd. released its 2024 three-quarter report. 24Q1-3 achieved operating income of 17.114 billion yuan, up 7.91% year on year; net profit to mother was 1.022 billion yuan, down 6.63% year on year; net profit after deduction was 0.928 billion yuan, down 6.84% year on year. 24Q3 achieved operating income of 6.063 billion yuan, a year-on-year increase of 2.78%; net profit to mother was 0.389 billion yuan, a year-on-year decrease of 20.62%; net profit after deduction was 0.361 billion yuan, a year-on-year decrease of 20.42%.
Market pressure is driving positive change, and future improvements can be expected
Domestic demand will be weak in 2024, and the consumption scenario will change. The company continues to actively reform, adjust the structure and expand the international market. Specifically, the company uses 1) the R&D side: reducing volume and quality in product development to increase individual product launch rates and sales contributions; at the same time, it is consumer-centered to deeply understand customer needs and create popular products with high quality and strong functionality; 2) Channel side:
The omni-channel layout optimizes the retail operation system around changes in user needs and consumption habits, and further optimizes the retail operation system from wholesalers to brand retail service providers; 3) Marketing side: Continuously enhance brand influence, establish brand reputation, establish industry benchmarks, and build a unique brand imprint by deepening the dissemination of content and participating in large-scale exhibition activities.
Among them, in 2024, Q1-3 Chenguang Technology's revenue was 0.882 billion yuan, an increase of 34.19% over the previous year. We analyzed that the company mainly adapted to the trend of channel diversification, actively promoted the company's omni-channel strategy, and achieved rapid expansion of online business. Chenguang Technology and Circuit have jointly established a unified pace, standards and procedures for online product development, using the refined operation of multiple stores+flagship stores to improve efficiency. Continue to promote new channel businesses such as Pinduoduo, Douyin, and Kuaishou, accelerate the development of new channel businesses, and quickly achieve market ranking. By product, in 2024, Q1-3's writing tools achieved revenue of 2.022 billion yuan, up 8.33% year on year, student stationery achieved revenue of 2.757 billion yuan, up 0.50% year on year, and office stationery revenue of 2.469 billion yuan, up 4.50% year on year.
Colipu's Q3 growth rate is slowing, and major retail stores are expanding steadily
1) Colipu: In 2024Q1-3, Colipu's revenue increased 10.07% year over year to 9.158 billion yuan. Revenue growth slowed, mainly due to short-term pressure on demand. As Colipu improves service quality, enriches product categories, strengthens customer discovery and increases internal share, and builds a national supply chain system, the growth rate is expected to pick up in the future. 2) Major retail stores: In 2024, Q1-3 achieved revenue of 1.117 billion yuan, an increase of 13.11% over the previous year. Among them, Jiumu Grocery Store achieved revenue of 1.057 billion yuan, an increase of 15.43% over the previous year. As of Q3 '24, Jiumu Grocery Store had 702 stores. We analyzed that Jiumu's steady growth was mainly due to the continuous expansion of the number of offline channels. The stores continued to improve in terms of product portfolio, refined store operation, and consumer insight and service, resulting in a continuous inspection of people, goods, and sites.
Profit performance was slightly under pressure, and the rate control for the period was good
In terms of profitability, 24Q1-3's gross margin was 19.78%, down 0.61 pct year on year; 24Q3 company's gross margin was 20.46%, down 1.40 pct year on year. Among them, the gross margin of 24Q3 writing tools increased by 0.90 pct to 42.09% year on year, gross margin of student stationery decreased by 0.85 pct to 33.43% year on year, and gross margin of office stationery fell 0.51 pct year on year to 26.05% year on year, and profit growth was challenged to some extent.
In terms of period expenses, the 24Q1-3 company's expenses rate for the period was 12.43%, up 0.58pct year on year, and the sales/management/R&D/finance expenses ratio was 7.54%/4.22%/0.83%/-0.16%, respectively, +0.44/+0.11/-0.08/+0.11pct, respectively. The 24Q3 company's expense ratio was 12.76%, up 1.01 pct year on year. Sales/management/R&D/finance expenses rates were 7.90%/4.07%/0.82%/-0.03%, respectively, +0.91/+0.05/-0.11/+0.16 pct, respectively. The overall cost rate for the period was well controlled. 24Q1-3's net interest rate was 6.24%, down 1.13pct year on year; 24Q3 company's net margin was 6.58%, down 2.09pct year on year.
Investment advice: As a domestic and foreign stationery company, the company's traditional business is developing steadily, moderately and positively. New businesses such as Chenguang Colipu and major retail stores continue to deepen and advance with high quality. We expect the 2024-2026 operating income of Chenguang Co., Ltd. to be 24.853, 27.963, and 31.471 billion yuan, up 6.43%, 12.54% year on year; net profit to mother will be 1.532, 1.8, 2.028 billion yuan, up 0.33%, 17.50%, and 12.65% year over year, corresponding PE of 18.5x, 15.7x, 14.0x, for 24 years, target price 39.80 yuan to maintain buy-A investment ratings.
Risk warning: Risk of new business development falling short of expectations; risk of policy impact exceeding expectations, etc.