Incident: (1) The company disclosed the 2023 annual report and the 2024 quarterly report. In 23, it achieved revenue of 71.44 billion yuan, an increase of 13.37% over the previous year, and realized net profit of 2.21 billion yuan, an increase of 30.23% over the previous year, and realized net profit without return to mother of 2.16 billion yuan, an increase of 24.83% over the previous year. The 24Q1 quarter achieved revenue of 25.63 billion yuan, an increase of 4.36% over the previous year, realized net profit of 80 million yuan, an increase of 12% over the previous year, and realized net profit without deduction of 835 million yuan, an increase of 13.82% over the previous year. (2) The company disclosed the 2023 profit distribution plan and plans to distribute a cash dividend of 19.50 yuan (tax included) for every 10 shares.
The rise in gold prices boosted the gross profit margin, and the cost ratio remained basically flat. (1) In 2023, gross margin increased 0.72 pp to 8.30% year on year, and the gross margin of the jewelry business increased 0.71 pp to 9.84% year on year.
The sales expense ratio was 1.48%, up 0.16pp; the management expense ratio was 0.69%, up 0.05pp; and the financial expense ratio was 0.2%, down 0.12pp year on year. (2) 24Q1 gross margin increased 0.35pp to 8.37% year on year, and the cost ratio for the period decreased 0.30pp to 2.01% year over year.
Stores continued to expand, and overseas markets performed well. In '23, the company significantly expanded its retail network. By the end of '23, the company had a total of 5,994 marketing outlets, with a net increase of 385 stores throughout the year, including a net increase of 392 affiliate stores in the mainland. Under the company's measures such as adjusting store layout and strengthening online sales, sales at overseas stores in the US and Canada reached record highs. The retail performance of stores in Hong Kong, China increased markedly after the number of visitors cleared customs increased.
Profit forecasting and investment advice. According to the company's annual report, in 2024, the company will accelerate the integration of market channels in Northeast China, increase the share of sales in South China and Southwest China, increase the net number of stores by no less than 300 throughout the year, and continue to strengthen the promotion of “Treasure Gold” and “Fengxiang Happy Event” themed stores. The company's net profit is estimated to be 25.85 billion yuan, 2,965, and 3.343 billion yuan respectively in 24-26, with year-on-year growth rates of 16.7%, 14.7%, and 12.7%, respectively. Maintaining the judgment of a reasonable value of 84.63 yuan/share, corresponding to 17 times PE in 24 years, maintaining the “buy” rating.
Risk warning. Fluctuations in gold prices have led to a slowdown in demand for gold jewelry; fluctuations in raw materials have caused fluctuations in gross margin; and the decline in high-end consumer sentiment has curtailed gold and jewelry consumption.