Net profit to mother is expected to be between 90 and 120 million in 23Q4, and net profit to mother increased by 299%-330% for the whole year

The company released a performance forecast. The net profit for 23Q4 is expected to be 0.94-117 million, and net profit after deducting non-return to mother of 0.92-112 million, all reversing losses over the previous year; 23 the net profit for the full year is expected to be 2.85-308 million, an increase of 299%-330%; net profit after deduction of 257-277 million yuan, an increase of 449%-493%.

The growth is mainly due to the company seizing good opportunities for consumer recovery, continuing to strengthen its brand power, commercial power and retail power, maintaining rapid growth online and recovering steadily offline; at the same time, the quality and efficiency of operations continued to improve, sales rates were effectively controlled, and financial expenses were drastically reduced year-on-year.

TW consolidated its online advantage, won the “Douyin Award” and was selected as the “Tmall Pioneer Case”. TW recently won the “Douyin E-commerce Gold Award 2023 New Product Marketing Award” and the “2023 Tmall Super Flagship Top 20 Pioneer Case of the Year”. TW exclusively debuted the Autumn and Winter College series on Douyin, selling out custom gift boxes for new products in seconds; improving drainage efficiency through the launch of a model of co-filming grass planting videos; stimulating search traffic with “college style” hot spots, and at the same time achieving acceptance on shelves. According to the Tmall Popularity Index model, the brand broke through the crowd and continued to perform well in the consumer wallet share index, not only bringing more new consumers to the brand, but also increasing the consumption of the brand by core consumers.

Three major reforms are being promoted offline, and the quality of operations is expected to continue to be optimized

On the offline side, TW is promoting the three major reforms of “channel, new retail, and quality”, including promoting direct management to franchise and online new retail, increasing the share of online performance of franchises and new retail, as well as the performance of shopping malls and leading Olai; introducing an online business model for offline stores to carry out private transformation of public domain passenger flow centered on offline; and increasing the share of new product performance and comprehensive gross profit margin through changing promotion policies and optimizing the promotion and promotion of new products.

Operational quality and efficiency have improved, and financial expenses have continued to decrease

Since 23, the company has strengthened efficiency improvements and terminal cost control, benefiting from personnel optimization, reduction in store expenses, and a year-on-year reduction in sales rates. Financially, the company successfully completed debt replacement for early M&A loans in '22, drastically reducing M&A loan balances and interest rates, and plans to repay 150 million dollars every six months from 2022/12/31 (inclusive) to 2025/06/30. The level of debt has declined and related interest expenses are expected to continue to decrease, further driving the increase in profit levels.

Maintain profit forecasts and maintain “buy” ratings

The company's TW continuously strengthens product positioning and style, and marketing keeps up with changes in market demand; VGRASS continues to iteratively upgrade product fabrics and detailed design; accelerates offline channel transformation, explores new retail models, and continues to improve the competitiveness of online business. We expect the company's net profit to mother in 23-25 will be 2.9/37/420 million yuan, EPS 0.8/1.1/1.2 yuan/share, respectively, and the corresponding PE will be 14/11/10x, respectively.

Risk warning: macroeconomic fluctuation risk, industry competition risk, financial risk, R&D design risk, etc.; the performance forecast is only a preliminary estimate, subject to the company's annual report.