The company's business performance grew steadily in 2023, and the 2024Q1 profit growth rate was relatively fast. The company released annual and quarterly reports: in 2023, it achieved revenue of 71,436 billion yuan (+13.4%), net profit to mother of 2,214 billion yuan (+30.2%); 2024Q1 revenue of 25.630 billion yuan (+4.4%), and net profit of 802 million yuan (+12.0%); in addition, it was announced that it plans to distribute a cash dividend of 19.50 yuan for every 10 shares. We believe that the company has accumulated a deep brand, that the reform of state-owned enterprises stimulates endogenous momentum, and that implementing the “Three-Year Action Plan” is expected to promote continuous growth. We keep our 2024-2025 profit forecast unchanged and add the 2026 profit forecast. We expect net profit to be 25.48/29.26/3.339 billion yuan for 2024-2026, the corresponding EPS is 4.87/5.59/6.38 yuan, and the current stock price is 15.9/13.8/12.1 times, maintaining a “buy” rating.
Profitability continued to increase in the first quarter, or benefiting from rising gold prices, the company's jewelry business achieved revenue of 58.136 billion yuan in 2023, an increase of 15.4% over the previous year, seizing consumption opportunities for gold products to achieve steady growth; the overall gross sales margin was 8.3% (+0.7pct), and the sales/management/finance expenses ratio was 1.5%/0.7%/0.2%, respectively. 2024Q1's profitability continued to increase, with gross margin reaching 8.4% (+0.3pct). We believe that the reason may be that international gold prices continued to rise in the first quarter, leading to an increase in the company's gold raw material inventory appreciation and gross sales margin. In terms of period expenses, 2024Q1's sales/management/financial expenses ratio was 1.3%/0.5%/0.2%, respectively, flat compared to -0.2%/-0.1%/, with an overall steady decline.
Firmly advance the various reform tasks of the “Double Hundred Action Plan”. The “Three-Year Action Plan” plans the future development of Lao Fengxiang as the “100 Year Gold Signature” for China's jewelry, continue to further promote “Double Hundred Action”, strive to complete the goals and tasks of the “14th Five-Year Plan”, and actively promote empowerment in the four dimensions of reform, technology, numbers, and culture in accordance with the “Three-Year Action Plan”. In terms of channels, by the end of 2023, the total number of company stores reached 5,994 (including 187 self-operated and 5,807 franchisees), a net increase of 385 for the whole year. In the future, the company will comprehensively consolidate its central sales position in the Yangtze River Delta and Yangtze River Economic Belt centered on Shanghai, rationally lay out offline marketing networks in key metropolitan areas and emerging regions, appropriately increase the sales share of South China and Southwest China, and focus on preparing sales companies in Northeast China. In 2024, it is planned to add no less than 300 specialty stores and distribution outlets (counters). In terms of retail business, we will continue to strengthen the promotion of themed stores such as “Treasure Gold” to enhance the brand image.
Risk warning: Market competition intensifies, reform results fall short of expectations, gold price fluctuations, etc.