Incidents:
Shuiyang Co., Ltd. announced its 2023 performance forecast: it is expected to achieve net profit of 28%-320 million in 2023, an increase of 124%-156% over the previous year; it will achieve net profit without deduction of 26%-30 million, an increase of 169%-210% over the previous year.
Business structure optimization and management efficiency improvement drive performance growth
The main factors for the increase in performance are: 1) The multi-level brand matrix system for the company's independent brands has been further improved, brand assets have continued to accumulate, the agency brand business has entered a healthy track, the overall business and product structure have been further optimized, and the share of high-margin brands continues to rise. At the same time, the company continues to pay attention to changes in the market environment, dynamically optimizes sales models, and increases overall gross profit. 2) On the premise of focusing on the long-term healthy development of the business, the company insists on refined operation, continuously improves management efficiency, and at the same time continuously improves organizational system construction. The cost control effect has improved, and the cost ratio has decreased. 3) The company expects the impact of non-recurring profit and loss in 2023 on current net profit of about 20 million yuan.
The dual business-driven strategy continues to advance, and equity incentives enable sustainable development. The company adheres to the “dual business-driven development strategy of its own brand and agency brand”. The private brand upgrade forms a 2+2+n matrix structure. Brands such as Onibang and EDB have performed well, the brand matrix has been further improved, and agency brands have formed a 1+5+n hierarchical structure, and overall profitability continues to improve. At the same time, in 2023, the company announced an equity incentive plan, granting 3.269,000 restricted shares (accounting for 0.84% of the total share capital) to no more than 345 incentive recipients at an award price of 7.87 yuan/share, unlocked in two installments, corresponding to the 23-24 performance assessment targets (net profit attributable to mother net profit excluding equity incentive fees) of 300 million yuan and 400 million yuan respectively. Equity incentives highlight the company's confidence in long-term development.
Profit Forecasts, Valuations, and Ratings
Maintaining the previous profit forecast, the company's revenue for 2023-2025 is estimated to be $56.36/65.69/7.606 billion yuan, respectively, with corresponding growth rates of 19.3%/16.6%/15.8%; net profit to mother of 2.91/391/461 billion yuan, respectively, with corresponding growth rates of 132.9%/34.5%/17.9%, respectively; and EPS of 0.75/1.00/1.18 yuan/share, respectively. Based on comparable company valuations, the company was given 22 times PE in 2024, corresponding to a target price of RMB 22.08, maintaining a “buy” rating.
Risk warning: industry competition intensifies; new brands fall short of expectations; new products fall short of expectations; rising traffic costs affect the company's profitability