Incidents:
The company announced its 2023 mid-year report. In the first half of the year, the company's revenue was 556 million yuan, +19.54% year-on-year, and net profit of 21.61 million yuan, +3.06% year-on-year. The performance was in line with expectations.
Comment:
Continue to focus on core brands and achieve good growth in the first half of the year
In the first half of the year, based on the different positioning characteristics of its brands, the company comprehensively used matrix and multi-level marketing methods to promote the dissemination of brand culture and outdoor spirit. By establishing a financial model for marketing projects, the company strengthened sales transformation, promoted brand building, and deepened the brand marketing layout. In the first half of the year, the company's core brand TOREAD (TOREAD) achieved revenue of 486 million yuan, an increase of 29.74% over the same period last year, and the TOREADKIDS brand achieved revenue of 30.5077 million yuan, an increase of 38.00% over the same period last year.
Refined channel operation to promote the improvement of store sales
The company continues to optimize the profit model of a single store, optimize store opening parameters, improve store opening success rate, and lay the foundation for future channel expansion and business growth. In the first half of the year, the company had 91 directly-managed stores, 79 fewer than in the same period last year, and 739 franchise stores, an increase of 124 over the same period last year. Among them, the single-store revenue of the company's directly-managed stores reached 1.089 million yuan in the first half of the year, an increase of 101.20% over the previous year. The total area of the company's directly-managed stores is 9,041 square meters. Based on sales flow, the average store efficiency of mature stores that have been open for 12 months or more in June 2023 is about 2,527,300 yuan/year; the average store efficiency of mature stores that have been in business for 12 months or more has increased by 129.96% over the same period last year.
The chip business is progressing steadily. G2 Touch's monthly revenue exceeds 10 million. The company places emphasis on R&D, innovation and application in the chip business. In the first half of the year, R&D expenses increased 53.29% year on year, R&D expenses reached 4.06%, an increase of 0.89 pct over the previous year. The company closely integrates with domestic and foreign market development needs, continuously refines and expands the product line, forms a product matrix, and has accumulated stable and high-quality customer resources with advanced technology, high-quality products, and efficient services, such as Samsung, BOE, and Riyadh. In the first half of the year, the company acquired G2 Touch and was consolidated on June 1. The corresponding monthly revenue for June was 15.1162 million yuan and net profit was 3.3623 million yuan (in 2022, G2 Touch's annual revenue was 88,7688 million yuan, and net profit was 15.6405 million yuan). At this stage, G2 Touch is developing low-cost solutions and active pen products with laptop customers. At the same time, it also undertook Samsung's automotive touch chip R&D project. The project is scheduled to be completed by the end of 2023. The first stage of R&D and sample production has been completed. The product has been verified in end customer products, and will gradually expand in the future as terminal products are sold.
Investment advice and profit forecasting
The company focuses on its own brand, and channel expansion and refined operation are being carried out simultaneously. It is expected that the results of the operation upgrade will gradually be shown within the year. The foundation for chip business development continues to be consolidated, and Beijing Xinneng and G2 Touch have the potential to develop collaboratively in the future. Under neutral expectations, we maintained the company's 23-25 EPS forecast of 0.12/0.18/0.24 yuan, corresponding to a 23-year PE of 62 times, 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.