Incident: The company released its 2023 performance forecast, achieving net profit attributable to mother of 7620-87.09 million yuan, a year-on-year increase of 40%-60%, and net profit deducted from non-mother of 6620-75.09 million yuan, an increase of 30%-47% over the previous year. Corresponding to 2023Q4 net profit attributable to mother was 771-18.59 million yuan, up 71%-313% year on year, and net profit after deducting non-return to mother was 465-13.54 million yuan, up 69%-391% year on year. Non-recurring profit and loss is estimated to contribute 10-12 million yuan to net profit attributable to shareholders of listed companies, mainly government subsidies and financial management income received.

Comment:

2023 is the last year to evaluate the first phase of the company's equity incentive plan. According to the assessment criteria, the target value of net profit growth in 2023 is 52.0875% compared to the net profit growth rate in 2020, and the target value of operating income growth rate compared to 2020 is 72.80%. The net profit calculation method is net profit attributable to shareholders of a listed company after deducting non-recurring profit and loss, excluding payment fees for all share incentive plans and employee stock ownership plans of the company and subsidiaries during the validity period of the company and subsidiaries. We expect to meet our assessment goals in 2023.

We think the company's future highlights are: 1) After the capital raised is in place, it is expected that joining and opening directly managed stores will accelerate markedly starting in 2024. In July '23, the company completed a fixed increase issuance, issuing 57.168,900 shares, raising a total capital of 690 million yuan and a net amount of 680 million yuan, mainly for the “Mancaron @Z Concept Store” terminal construction project, omni-channel jewelry integrated platform construction, and the “Mu Can” brand and creative promotion project. 2) E-commerce is the company's strong channel. In the first three quarters of 2023, online business revenue was 444 million yuan, an increase of 40.44% over the same period last year, contributing to the main revenue growth. Considering the low base of 22Q4, the excellent e-commerce performance of Double Eleven in 23, and the impressive growth of the Fenghua series, we expect the online revenue side growth rate to be 50%-60% for the whole of 2023. 3) The company is expected to launch a new equity incentive plan this year.

Profit forecast: We expect the company's 2023-2025 revenue of 2,028/24.30/2,826 billion yuan, an increase of 26%/20%/16%, net profit of 0.85/1.04/115 million yuan, an increase of 55%/23%/11%, EPS of 0.32/0.40/0.44 yuan, respectively, corresponding to the closing price of January 24, 2024, PE is 35/29/26X.

Risk factors: The ban on restricted stocks was lifted, the progress of fund-raising projects fell short of expectations, and the price of gold fluctuated sharply.