Incident: Chongqing Department Store released its 24Q1 financial report. In 24Q1, it achieved revenue of 4.850 billion yuan/ -4.63%, and net profit of 435 million yuan/ -15.07%.
By business type, the electrical appliance industry in Chongqing is growing positively, and the overall number of business formats remains flat. In 24Q1, the number of department stores/supermarkets/electrical/auto trade businesses was 50/152/41/38, respectively, and the total number remained flat from month to month. Among them, department store revenue in Chongqing is 705 million/ -4.87%, supermarket revenue is 1,948 million/ -2.51%, electrical appliance revenue is 790 million yuan/ +4.71%, and auto trade revenue is 1.25 billion yuan/ -9.68%.
Gross margin and expenses: Continuously reduce costs and increase efficiency through cost control and organizational optimization.
The 24Q1 gross profit margin was 28.20% /+1.07pcts, and the sales/management/R&D/finance expense ratios were 13.21%/4.23%/0.10%/0.33%, respectively, with a year-on-year change of +0.10pcts/-0.54pcts/-0.05pcts/-0.35pcts.
The absorption and merger of Chongqing Trading Company was implemented in Q1: On January 31, 2024, the company, the trading company group and the counterparty signed the “Delivery Agreement on the Absorption and Merger of Chongqing Department Store Co., Ltd.” and the parties agreed to use January 31, 2024 as the delivery date for this transaction. From the date of delivery, all assets, liabilities, business, personnel and all other rights and obligations of the trading company group are transferred to the company. We believe that this merger will bring a clearer equity and governance structure to the company and promote the company's positive development in the context of state-owned enterprise reform.
Looking ahead to 24 years: Embracing discount retail and mass snack sales, we are expected to achieve increased performance.
According to Wind, the company's supermarket business actively explores “community discount stores”, strengthens supply chain construction, and plans to pilot 20+ stores; plans to build 50+ in-store snack zones, strengthen direct snack selection, and carry out online price comparisons to provide consumers with high-quality, tasty and inexpensive products, and effectively increase gross profit margins.
Profit forecasting and valuation: The company is a market-leading and competitive retail enterprise with outlets and operating scale in Chongqing and Sichuan regions. The company has actively embraced change and returned to the essence of commerce. It began to lay out discount retail-related businesses at the end of '23, and is expected to increase its performance in 24; in addition, the company has also invested in immediate consumer finance, which also contributed quite a bit to profits. The overall forecast is that the company's net profit for 2024-2025 will be 1.46 billion yuan/1.62 billion yuan, corresponding to 8x/7xPE, maintaining a “highly recommended” rating.
Risk warning: business expansion falls short of expectations, consumption recovery falls short of expectations, investment returns fall short of expectations