The company announced the 2023 performance report on January 12. In 2023, the company achieved net profit of 285-308 million yuan, an increase of about 299%-330% over the previous year. Achieved net profit of 257-277 million yuan after deduction, an increase of about 449%-493% over the previous year. The company seizes opportunities for consumer recovery, strengthens brand power, commercial power and retail power, and promotes store efficiency. Maintain a buy rating.

Key points to support ratings

Peak season catalysis+improved store efficiency drove the further release of Q4 profit flexibility. In 2023, the company achieved net profit of 285-308 million yuan, an increase of about 299%-330% over the previous year. Achieved net profit of 257-277 million yuan after deduction, an increase of about 449%-493% over the previous year. Looking at the Q4 single quarter, according to the median calculation, the company achieved net profit of 106 million yuan (-3561 million yuan in the same period last year), an increase of 26.71% over the 2021 Q4 period, achieving net profit deducted from mother 102 million yuan (-6.1318 million yuan in the same period last year), an increase of 31.78% over 2021 Q4, further releasing net profit flexibility in Q4. Q4 The arrival of the peak sales season is driving rapid revenue growth. At the same time, the company seizes the opportunity of consumer recovery. TW continues to strengthen its image as a leading brand academy, upgrade the casual women's clothing product line, promote the expansion of multiple categories of menswear and children's clothing, and promote the improvement of store efficiency. The online business continues to grow rapidly. TW and VG brands promote multi-platform cooperation, lay out private marketing, focus on building live streaming matrices, strengthen accurate marketing, and focus on delivery efficiency.

Currently, TW is still growing, and I am optimistic that the company's net profit will continue to grow rapidly in 2024.

Fee control continues to advance, and financial expenses continue to decrease. The company's operational quality and operational efficiency continue to improve, sales rates are effectively controlled, and refined operation continues to enhance brand competitiveness. At the same time, financial expenses were drastically reduced year on year. The company's financial expense ratio in 2022 was 4.07%, a year-on-year decrease of 1.13pct. It is expected that the financial expense ratio will drop further in 2023. As interest-bearing liabilities are further reduced, financial expenses will continue to decrease, and I am optimistic that the company's profit flexibility will be further released.

The two brands are developing in omni-channel collaboration, and we look forward to the continuation of the company's growth. The company's multi-brand omnichannel development is good. The TW brand is based on IP advantages and refined online operations, and offline franchise expansion is expected to drive revenue growth; the VG brand emphasizes independent research and development, endogenous growth is good, and there is plenty of room for online and offline channel expansion. The company reduces the balance ratio and enhances profitability through debt restructuring, main business operations and capital market financing. In the future, as the company's debt pressure is reduced and the financial structure is optimized, profit flexibility is gradually released, and medium- to long-term revenue is expected to grow steadily.

valuations

Under the current share capital, the company's refined operation has led to an increase in profit levels. We raised the company's 2023-2025 EPS to 0.83/1.07/1.34 yuan/share, corresponding to PE14/11/9 times. Maintain a buy rating.

The main risks faced by ratings

Competition in the industry intensifies; offline channel expansion falls short of expectations; risk of impairment of goodwill.