occurrences

The company published its 2022 annual report and the first quarter report of 2023.

Comment:

The footwear business is gradually being liquidated. In '23, the company is expected to lighten the company's revenue of 3,901 billion yuan in 2022, an increase of 38.75% over the previous year; to achieve net profit of -265 million yuan, after deducting net profit of non-return to the mother - 319 million yuan. The loss margin is narrower than the same period last year. The main reason is that the offline channels of the company's footwear business have been greatly affected. The company has increased its efforts to promote footwear inventory. Affected by price cuts, increased discount rates, etc., it has calculated bad debts and prepared for inventory price reductions of about 291 million yuan. Currently, shoe inventory has been drastically reduced and the inventory age structure has improved dramatically, and the impact on the company's performance in 2023 is expected to be drastically reduced. Furthermore, due to the influence of the macro environment, the company accrued a goodwill impairment of 43,532,200 yuan for the two companies holding Fashion Fengxun and Beijing Shixin. In the first quarter of 2023, the company achieved operating income of 1,102 billion yuan, an increase of 37.22% over the previous year; it achieved net profit of -38 million yuan, after deducting net profit of non-return mother -45 million yuan, a year-on-year shift from profit to loss. The short-term pressure on performance is mainly due to increased expenses such as the company's business adjustments and organizational structure upgrades.

The social e-commerce business continues to grow rapidly. It is expected that the cloud iterative upgrade will enable large-scale IP construction. In 2022, the company's social e-commerce business achieved revenue of 2,332 billion yuan, an increase of 35.27% over the previous year. The live e-commerce business achieved a GMV of about 15 billion yuan, an increase of about 50% over the previous year. The number of product SKUs reached 40,000, an increase of 45% over the previous year. There were 25 new artists signed in 2022, with a total of 51 signed artists. In addition, the company actively entered the non-standard apparel category and perfected the anchor matrix, with more than 6 anchors over 100 million in a single show. At the same time, the company continued to iteratively upgrade the “Remote View Cloud” system, create a standardized SOP, and completed the preparation and launch of the “Remote Vision Future Station” and the “Remote Vision Dream Station” one after another. At the same time, the company invests in R&D in various fields such as digital asset libraries, generative AI, and digital virtual people to cultivate new momentum for development.

Investment advice and profit forecasting

The company's Yuanwang Network is the leading MCN agency of Douyin and Kuaishou. With the expansion of anchors, supply chain integration, and the construction of Yuanwang Yunzhongtai, it continues to drive the growth of the live e-commerce business. The company uses supply chain advantages to add brand distribution business and enter the field of non-standard clothing to provide SaaS platform services. The new business is expected to drive the rapid growth of GMV. The traditional footwear industry is gradually being liquidated, and the impact on performance is expected to be drastically reduced. The equity incentive plan shows confidence in long-term development. We expect the company's net profit to be 474/635/834 million yuan in 2023-2025, EPS at 0.52/0.70/0.92 yuan/share, and PE at 41x/31x/23x, maintaining the “buy” rating.

Risk warning

There are risks of tightening industry regulations, macroeconomic risks, repeated risks of the epidemic, risks of the divestment of the footwear industry falling short of expectations, and increased market competition.