The company's 2022 revenue decreased 20.13% year on year, and Guimo's net profit decreased 37.00% year on March 29. On March 29, the company announced its 2022 annual report: 2022 achieved operating income of 693 million yuan, a decrease of 20.13% from the previous year, and achieved net profit of 86 million yuan, converted to fully diluted EPS of 0.21 yuan, a decrease of 37.00% from the previous year, after deducting net profit of 84 million yuan from the previous year, a decrease of 27.59% from the previous year.

Looking at a single-quarter split, 4Q2022 achieved operating income of 152 million yuan, a year-on-year decrease of 26.59%, and achieved net profit of 38 million yuan, converted to fully diluted EPS of 0.09 yuan, a decrease of 25.47% over the previous year, and achieved net profit of 37 million yuan after deducting non-return to the mother, a decrease of 20.85% from the previous year.

The company's consolidated gross margin increased by 0.01 percentage points in 2022, and the cost rate for the period increased by 1.39 percentage points. The company's comprehensive gross margin in 2022 was 55.15%, up 0.01 percentage points from the previous year. Looking at a single-quarter split, 4Q2022's consolidated gross margin was 57.87%, down 0.92 percentage points from the previous year.

The cost rate for the company period in 2022 was 35.20%, up 1.39 percentage points from the previous year. Among them, the sales/management/finance expense ratio was 5.94%/33.27%/-4.01%, respectively, and +0.20/ +5.00/ -3.81 percentage points respectively over the previous year. The 4Q2022 company's expense ratio for the period was 22.27%, down 2.90 percentage points from the previous year. Among them, the sales/management/finance expense ratio was 6.64%/19.97%/-4.33%, respectively, and the year-on-year change was +0.49/+0.85/ -4.25 percentage points respectively.

Host special events offline and actively explore Douyin live streaming online

By the end of 2022, the company had a total of 1 department store, 4 supermarkets, and 1 warehouse outlet. On the offline side of 2022, the company hosted various special events to gather popularity, such as the “Ximu Hengchun” China Liaoning River Marble Tasting Exchange Conference, the first Blind Box Festival, a convenience store, and the Guochao Music Festival in collaboration with the Liaoning Arts and Games Association. On the online side, the company launched channel QR codes to optimize the membership registration process, while actively exploring new areas of Douyin live streaming and forming a live streaming team. In 2022, the company's online transaction volume was 13.172 million yuan, and online transactions generated revenue of 3.4616 million yuan.

Lower profit forecasts and maintain the “increase in holdings” rating

The company was greatly affected by the impact of the epidemic in 2022. In particular, terminal retail sales in major department stores declined significantly, which in turn affected the company's revenue. Considering that there is still some uncertainty about the recovery process of consumption power in the Shenyang region, we lowered the company's 2023/2024 EPS forecast by 22%/21% to 0.23/0.24 yuan, adding 0.27 yuan to the company's 2025 EPS forecast. The company has a good reputation in the Shenyang region and has a strong competitive advantage. Since the mixed reform, talent pool construction has been continuously optimized to maintain the “increase in holdings” rating.

Risk warning: The operating conditions of major stores fell short of expectations, and the improvement in operations after the mixed reform fell short of expectations.