2024 and 1Q25 results fell short of our expectations
The company announced 2024 results: achieved revenue of 6.7 billion yuan, a decrease of 6.6%, mainly due to the impact of supermarket closures, net profit of 0.22 billion yuan, a decrease of 3.3%, lower than our expectations. Mainly due to strong pressure on the cost side during the climbing period of the new project, after deducting 0.14 billion yuan of non-net profit, the same increase of 66.8%. At the same time, the company plans to pay a cash dividend of 2 yuan for every 10 shares, with a dividend ratio of about 70%.
The 1Q25 company achieved operating income of 1.79 billion yuan, a year-on-year decrease of 8.6%; net profit to mother was 0.14 billion yuan, up 2.9% year on year; net profit after deducting non-return to mother 0.13 billion yuan, up 21.2% year on year, lower than our expectations, mainly due to the fact that expenses related to climbing the slope of new projects still need to be released.
Development trends
1. Shopping centers operate steadily, new projects drive growth, and the supermarket sector's revenue from closing stores is under pressure. 1) By business, under a comparable scale in 2024: shopping center revenue was 3.75 billion yuan, down 0.9% year on year, and supermarket revenue was 2.07 billion yuan, down 16.3% year on year, mainly due to increased market competition combined with store adjustments. In addition, the real estate business revenue was 0.18 billion yuan, mainly the remaining housing construction projects of Times Garden; 2) By channel, GMV, the company's e-commerce company in 2024, achieved 1.02 billion yuan and revenue of 0.02 billion yuan, an increase of 45.6% over the previous year. Wushang Network upgraded and revised Dolphin Network to actively explore omni-channel marketing integration; in terms of offline stores, the number of shopping malls/supermarket stores at the end of 2024 was 10/62, respectively. Compared with the end of 2023, the number of shopping centers/supermarket stores was 10/62, respectively. A supermarket store with poor efficiency.
2. Gross margin has been rising steadily, and profitability has improved marginally. In 2024, the company's gross margin also increased 2.0ppt to 49.1%, with the main retail margin increasing 1.6ppt to 41.6%. In terms of cost rates, sales/management expenses increased by 0.8 ppt/0.3ppt to 34.6%/3.1%, respectively, mainly due to depreciation and amortization pressure during the continuous climbing period of newly started projects and the increase in rigid costs such as labor and property. Under the combined impact, the net interest rate/deducted non-net interest rate increased by 0.3 ppt/0.9ppt to 3.2%/2.1%, and profitability gradually recovered.
3. Promote asset-light layout and main business renewal. The company's subsequent plans are to steadily advance the implementation of asset-light projects to promote the opening of the Intercontinental Hotel in Nanchang and duty-free shops in Wuhan within 2025; the “Golden Triangle” core business district will continue to consolidate its central position around brand attacks and business format upgrades; the regional market will accelerate the pace of adjustment, and the supermarket sector will simultaneously promote supply chain integration and omnichannel integration.
Profit forecasting and valuation
Considering that new projects such as Dream Era and Wushang Mall are under high cost pressure, the profit forecast for 2025 was lowered by 37% to 0.27 billion yuan, and the profit forecast for 2026 was introduced at the same time. The current stock price corresponds to 26.6/22.1 times P/E in 2025/26. Maintaining a neutral rating and maintaining a target price of 8 yuan, corresponding to 23.1/19.2 times P/E in 2025/26, there is 13% downside compared to the current stock price.
risks
New projects fell short of expectations, and market competition intensified.
