Events: The company released its 2023 three-quarter report. The first three quarters achieved revenue of 3.805 billion yuan, -8.38% year-on-year; net profit of 425 million yuan, +21.44% year-on-year; net profit of 414 million yuan was deducted from the mother, +20.77% year-on-year.
Comment:
Q3 Revenue increased year over year, and profit performance was impressive. The company's first three quarters were affected by the weak recovery in consumption and the termination of direct supply to Europasus brand business. Revenue declined year-on-year. Excluding the impact of the direct supply to Europe business, the first three quarters's revenue was +4.88%; on the profit side, the profit side achieved a good recovery due to product restructuring, falling raw material prices, and improved business quality and efficiency. Looking at the single quarter, 2023Q1/Q2/Q3 achieved revenue of 9.57/14.42/1,406 billion yuan, a year-on-year difference of -23.10%/-4.32%/+0.33%; achieved net profit of 1.01/2.54/163 million yuan, a year-on-year difference of -18.40%/+37.99%/+37.43%, respectively, and Q3 revenue increased year-on-year. Excluding the impact of European direct supply business, single Q3 revenue is +16.74%. Profit growth is expected to continue with the gradual recovery of the consumer environment and the company's own channels. With optimization and promotion, the company's overall revenue and performance are expected to continue to improve quarter by quarter.
Profitability continues to improve. The company's gross margin for the first three quarters of 2023 was +4.32pct to 50.79% year on year. We think it is mainly due to product structure optimization, raw material price decline, and the company's own quality and efficiency improvement effects; the company's sales/management/ R&D/financial expenses in the first three quarters were +0.96/+0.12/+0.95/-1.02pct to 26.25%/5.84%/-1.17%, respectively, with net interest rates of +3.38pct to 13.62% year-on-year. Looking at a single quarter, the company's gross profit margin for the 2023Q3 single quarter was 50.98% (year-on-year +3.70pct, month-on-month -1.22pct), net profit margin of 11.57% (y-3.13pct, month-on-month, -6.07pct), single-quarter profit improved year-on-year, and it is expected that profit levels will improve throughout the year.
E-commerce channels are growing rapidly, and V6 is progressing steadily. In the first three quarters of 2023, the company's distribution/e-commerce, direct supply/direct sales channels achieved revenue of 28.99/6.40/1.42/103 billion yuan respectively, with a year-on-year difference of +4.7%/+23.35%/-76.57%/-54.37%, respectively. Among them, distribution channels have resumed positive growth driven by the implementation of the company's multiple marketing strategies, e-commerce channels have continued to increase resource investment in the three major platforms of Tmall, JD, and Douyin, and revenue has maintained relatively rapid growth; direct supply channels have declined due to the termination of Opus brand cooperation; direct supply channels have declined due to the termination of Opex brand cooperation; and direct sales channels have declined due to the transfer of the company's direct-run stores in Shanghai, Shenzhen and other places.
In addition, the company's V6 home furnishing business expanded steadily. In the first three quarters, 110 new V6 major home stores were opened and 663 redecorated stores were opened, laying the foundation for the long-term development of the V6 home furnishing business.
Investment suggestions: The company's “one, two wings” development strategy is progressing steadily, and its long-term development strength is strong.
We maintain the company's profit forecast. The net profit for 2023-2025 is estimated to be 8.24/9.63/1,124 billion, corresponding to the current market value PE of 16/14/12X, respectively, maintaining the “buy” rating.
Risk warning: Raw material prices have fluctuated sharply, consumption recovery, and channel reforms have fallen short of expectations, etc.