Incidents:
The company announced its 2022 annual report and 2023 quarterly report. In 2022, the company's revenue was 1,139 million yuan, -8.35% year on year, net profit of 69.923 million yuan, +28.38% year on year; in the first quarter of 2023, the company's revenue was 243 million yuan, +14.63% year on year, and Guimo's net profit was 184.13,400 yuan, 123.97% year on year. The performance was in line with expectations.
Comment:
Profitability improved markedly, and last year's Q4 performance grew well
In 2022, the company's comprehensive gross margin reached 51.69%, a sharp improvement over '21 and an increase of 11.30pct over the previous year. Among them, Q4's gross margin reached 69.50% in a single quarter, up 37.38 pct. and 28.40 pct., respectively, over the same period last month.
Thanks to a sharp improvement in gross margin, the company achieved a 135.83% increase in net profit in Q4 last year when revenue was -33.17% year over year. The company's Q1 performance continued its good growth trend this year, with gross margin and net interest rates rising 3.10 pct and 1.85 pct., respectively. In 2022, the company's operating cash flow was 202 million yuan, +543.21% year on year. This year's Q1 was 17.1793 million yuan, +146.02% year on year.
Focus on own brands, expand channels and improve operating quality
The company adjusted and contracted authorized brands and focused on operating its own brands. In 2022, the company's full-brand offline stores reached 796, an increase of 10 over the previous year, including a net increase of 50 stores under the core brand TOREAD. Improve the scale of channels and the success rate of new stores through refined operation and management models such as store classification and product classification. In 2022, the results of optimizing and upgrading the company's channel operation strategy were not fully demonstrated. Franchise and direct sales revenue fell 5.50% and 20.86% respectively, but after the epidemic factors were gradually eliminated, Q1 revenue growth resumed this year, and the adjustment results began to show. Targeting online channels, the company introduced a proxy operation model, increased store traffic and visual presentation, and lowered the investment rates at Tmall's official flagship stores.
At the same time, it actively embraced live e-commerce and collaborated with celebrities such as Li Jiaqi, Honeybee Surprise Agency, and Lier Baby to broadcast more than 374 live broadcasts. In 2022, e-commerce channel revenue was 322 million yuan, +6.47% year on year. The second phase of the company's digital 2.0 platform construction project was completed, enabling online process management and control of supplier procurement and delivery processes and full integration with transaction modules, promoting further improvement in business operation efficiency.
Xinneng packaging production line trial production line increased the share acquisition ratio of G2 Touch. Within last year, the company focused on developing the Mini LED backlight and direct display market, continuing to develop high-quality customers and strengthening in-depth cooperation with strategic customers. In 2022, Beijing Xinneng's revenue was 8.438 million yuan, which did not fulfill its previous revenue promise. However, through cooperation with wafer manufacturers such as Silterra, Tower Jazz, Samsung Foundry, etc., Xinneng ensures production capacity support to guarantee production capacity supply, and its own packaging production line began trial production in November last year, so there is a good foundation for subsequent business development. In March of this year, the company acquired 72.79% of G2 Touch's shares, and in April, management decided to acquire another 22.22% of G2 Touch's shares. After completion, it will directly hold 95.01% of the shares. The core team of G2 Touch is mainly from electronics companies such as Samsung and LG. They have many years of industry experience. Downstream customers are similar to Beijing Xineng, and there is potential for collaborative development in customer expansion and in-depth customer cooperation in the future. The G2 Touch single-layer On-Cell solution has the advantages of strong edge consistency and high accuracy in segments such as touch laptops and tablets of 7 inches or more, and its in-vehicle products have also completed development and sample production. At this stage, the notebook panel industry has begun to pick up, the localization process of supporting industries related to the panel industry will accelerate, and the upstream chip industry is expected to directly benefit. On the other hand, under the wave of intelligent development in the automotive industry, the future development prospects of G2 Touch in the automotive field are worth looking forward to.
Investment advice and profit forecasting
The company focuses on its own brand, and channel expansion is being carried out simultaneously with refined operations. It is expected that the results of the operation upgrade will gradually be shown during the year. The foundation for chip business development continues to be consolidated, and there is a possibility of collaborative development between Core Energy and G2 Touch in the future. Considering the parallel performance of the acquisition of G2 Touch and the impact of the gradual recovery in outdoor goods sales, we raised the company's EPS for 23-24 to 0.12/0.18 yuan, predicting EPS of 25 to 0.24 yuan, corresponding to 64/42/31 times PE in 23-25, maintaining the “increase in holdings” rating.
Risk warning
The epidemic is repeated; channel expansion falls short of expectations; new business integration falls short of expectations; exchange rate fluctuations, and goodwill is impaired.