Net profit to mother increased by 12% in the first quarter of 2024, and the overall performance was steady under a high base. The company's revenue for 2023 was 71,436 billion yuan, +13.37% year on year, net profit to mother of 2,214 billion yuan, +30.23% year over year, after deducting non-net profit of 2,156 billion yuan, or +24.83% year over year, which is consistent with previous performance report data. In the first quarter of 2024, the company's revenue was +4.36% YoY, net profit to mother +12.0% YoY, and +13.82% YoY after deducting non-net profit. It continued its steady growth performance under a high base in the first quarter of last year, and is expected to benefit from increased consumer demand for gold and jewellery and rising gold prices. In terms of dividends, the company plans to distribute a dividend of 19.5 yuan (tax included) for every 10 shares, totaling 1.02 billion yuan, accounting for 46.07% of net profit returned to mother in 2023.
There was a net increase of 385 stores in 2023, and the optimization of institutional mechanisms continues to be promoted. By business, jewelry revenue in 2023 was $58.136 billion, +15.44% year over year; gold trading business revenue was 12.75 billion yuan, +5.53% year over year; pen/handicraft sales business achieved revenue of 225/58 million yuan respectively, +3.66%/-37.16% year over year, respectively. Channel expansion progressed steadily. 385 stores were opened in 2023, with a total of 5,994 stores at the end of the period, including 5,807 franchise stores, a net increase of 392. Furthermore, in 2023, the company prepared and formed a three-year action plan (2023-2025) and the implementation plan for the double hundred reform, which continues to highlight gold and jewelry as its core business and enhance the company's overall competitiveness.
The gross margin increased steadily, and the expense ratio was optimized during the first quarter of 2024. The company's gross margin in 2023 was +0.72 pct to 8.3% year on year, and the sales/management expenses ratio was +0.16 pct/+0.05 pct year on year, respectively. The overall cost control effect was stable. The gross margin continued to grow steadily in the first quarter of 2024, +0.35pct to 8.37% year on year, sales expenses ratio -0.17pct to 1.25% year on year, management expenses ratio -0.11pct to 0.49% year on year, and the cost ratio was optimized. The number of inventory turnover days decreased by 11 to 80 days in 2023, and turnover efficiency improved. Net operating cash flow in 2023 was 7.212 billion yuan, +648% year-on-year, and net operating cash flow for the first quarter of 2024 was 4.081 billion yuan, or -39.7% year-on-year, mainly due to the increase in the purchase price of gold, which had a significant impact on the increase in the company's cash purchases and labor payments.
Risk warning: Store expansion falls short of expectations; franchisee management is poor; gold prices fluctuate greatly.
Investment advice: As a leading brand of gold and jewelry, the company is expected to continue to benefit from the increase in residents' value-preserving consumer demand. The steady rise in gold prices is also conducive to improving the company's gross margin performance. The company itself will also further promote the expansion of franchise stores to expand its market share, continue to improve R&D and design capabilities on the product side, and promote deepening institutional reforms in terms of internal governance to further release operating benefits. We maintained the company's 2024-2025 net profit forecast of 26.32/2993 billion yuan, and added a 2026 net profit forecast of 3.343 billion yuan, corresponding PE of 15.4/13.5/12.2 times, respectively, and maintained a “buy” rating.