Incident: The company announced its 2023 annual report and 2024 quarterly report. In 23, the company achieved operating income of 71,436 billion yuan, +13.4% year over year; net profit to mother of 2,214 billion yuan, +30.2% year over year. 24Q1 achieved operating income of 25.630 billion yuan, +4.4% year over year; net profit to mother of 802 million yuan, +12% year over year.
The profit side declined slightly in 23Q4 due to subsidiary lawsuits, and the year-on-year trend was positive in 24Q1. 23. Benefiting from the increase in gold prices throughout the year, the company's gross margin reached 8.3%, +0.72pct year on year, the period expense ratio reached 2.41%, +0.08pct year on year, and the net profit margin was +0.4pct to 3.1% year on year. Affected by the lawsuit in 23Q4, the net interest rate due to mother was -0.96 pct to 2.67% year over year, and the 24q1 benefit-fee optimization net interest rate was +0.21pct to 3.13% year over year.
Gold consumption is booming and offline stores continue to expand, driving the company's steady growth in 23 years of performance. (1) Product side: In '23, the company achieved revenue of 2.24/581.36/127.50/0.58 billion yuan for pen products/jewelry/gold trading/handicraft sales, respectively, +3.7%/+15.44%/+5.5%/-37.2% year-on-year, with gross margin of 25.5%/9.8%/0%/23.7%. (2) Channel side: Direct operation/wholesale achieved revenue of 41.14/54.303 billion yuan respectively in '23, +29.4%/+14.4% year-on-year. Offline market coverage and share continued to increase. 385 net stores were opened within 23 years, and a total of 5,994 domestic and foreign stores were owned by the end of 23. Product sales and channel expansion jointly push the company to exceed its annual profit budget target.
Seize national style hot spots to create trendy domestic products, and upgrade landmark stores to enhance brand image. In '23, the company developed a series of new products such as “Heritage, Celebration, and Rebirth” as the theme of “Heritage, Celebration, and Rebirth”, including “Dragon Love” pure gold jadeite jewelry. In the fourth quarter, the Laofengxiang Treasures Private Chat Center was renovated and opened, creating an IP for Laofeng Xiang Hai Pai jewelry culture.
Investment advice: As a century-old jewelry brand, Lao Fengxiang has a stable position as a leader in the industry. We expect the company to achieve operating income of 817.6/917.9/99.77 billion yuan in 24-26, net profit of 25.91/29.19/32.36 billion yuan, EPS 4.95/5.58/6.19 yuan, and the latest stock price corresponding to PE is 15.6/13.8/12.5 times, maintaining the “increase” rating.
Risk warning: Consumption capacity recovery falls short of expectations; gold prices fluctuate sharply; channel expansion falls short of expectations