Incidents:
The company announced its 2023 results. In 2023, the company achieved operating income of 67.54 billion yuan/YOY +24.1%, net profit of 6.71 billion yuan/YOY +33.5%, and net profit after deducting non-return to mother of 6.65 billion yuan/YOY +35.7%, which is basically in line with the previous performance report. In Q4 alone, the company achieved revenue of 16.70 billion yuan/YOY +10.8%, net profit of 1.51 billion yuan/YOY +274.7%, and net profit after deducting non-return to mother of 1.46 billion yuan/YOY +358.9%.
Product structure optimization, rent pressure is obvious
The company's tax-free and taxable revenue in 2023 was $442.3/22.34 billion, respectively, +69.9%/-20.1% year-on-year.
Thanks to product structure optimization, the gross margin for the whole year was 31.8%/+3.4pct year over year, with slight fluctuations between quarters. The gross margin for Q1/Q2/Q3/Q4 was 29.0%/32.8%/34.5%/32.0%, respectively. On the cost side, the company's management expenses remained stable, and the management expense ratio was 3.3% /year over year - 0.8 pct. Sales expenses were dragged down by leasing, and the pressure increased, and the sales expense ratio reached 13.9%/+6.5 pct year over year. The net return interest rate for the whole year was 9.9% /year over year +0.7pct, and the net return interest rate for each quarter was 11.1%/10.4%/9.0%/9.0%, respectively.
Daily revenue continues to recover, and the new seaport is profitable
In 2023, Sanya duty-free shops/Haifen Company/Nisshang Shanghai/Haikou Duty Free City achieved revenue of 283.6/49.2/178.2/6.84 billion yuan respectively, with year-on-year growth rates of -6.2%/-12.8%/+26.0% /-. In terms of net profit, Sanya City Duty Free Shops/Haifen Company/Nisshang Shanghai/Haikou Duty Free City contributed 26.5/2.0/2.6/0.3 billion yuan to net profit, +3.6%/-42.8%/-59.1% /-. The corresponding net interest rate was 9.3%/4.0%/1.4%/0.5%, +0.9pct/-2.1pct/-3.0pct/- year-on-year, respectively.
The dividend ratio increased, and inventory continued to be optimized
The company plans to pay a dividend of 3.41 billion yuan, with a dividend ratio of 50.85%, a significant increase from 32.90% at the end of 2022. The corresponding dividend ratio is also raised to 2.0%, and shareholder returns have been strengthened. From the perspective of operating capacity, at the end of '23, the company's inventory was -24.6% year-on-year, the number of turnover days was 191.47, and inventory turnover accelerated.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 821.0/949.4/105.41 billion yuan, respectively, with year-on-year growth rates of 21.6%/15.6%/11.0%, net profit to mother of 81.2/98.4/11.38 billion yuan, year-on-year growth rates of 20.9%/21.2%/15.6%, EPS 3.9/4.8/5.5 yuan/share, respectively, and a 3-year CAGR of 19.2%. In view of the company's strong competitive advantage, based on comparable company valuations, we gave the company 25 times PE in 2024, with a target price of 98.10 yuan, maintaining a “buy” rating.
Risk warning: residents' spending power is weakening; tourism recovery falls short of expectations; operation of new projects falls short of expectations, etc.