Introduction to this report:
23Q4 turned a loss into a profit and ushered in an inflection point in performance. Among them, Northbell's revenue declined slightly year-on-year, and profitability continued to recover. Following the gradual recovery of the cosmetics consumer side and the gradual clearance of small and medium-sized foundries, the company's performance is expected to rise steadily.
Key points of investment:
Investment advice: Refer to the company's performance forecast, considering that demand for cosmetic terminals is still weak, downgrade the 2023-25 EPS forecast to -0.11 (-0.01) /0.08 (-0.22) /0.25 (-0.22) yuan. Considering that the company's marginal improvement is expected to bring about performance elasticity, maintain the target price of 6.0 yuan, and maintain an increase rating.
23Q4 turned a loss into a profit, and an inflection point in performance was reached. The company released its 2023 performance forecast. The net loss for 2023 is estimated to be 0.50-63 million yuan, a decrease of 92% to 93% over the same period of the previous year, net loss after deducting 0.48-61 billion yuan, a decrease of 92% to 94% over the same period of the previous year; of these, 23Q4 net profit to mother was 0.01-014 billion yuan, after deducting non-net profit of 0.09-0.22 billion yuan, reversing losses year-on-year losses, mainly due to the company's subsidiary Northbell reducing costs and increasing efficiency.
The cosmetics business bottomed out and improved operating efficiency. In 2023, Northbell, the company's cosmetics foundry business entity, is expected to achieve operating income of 1.92 billion yuan, a slight decrease over the previous year. It is estimated that this is mainly due to a significant drop in wet wipe products; net profit is expected to lose 38-45 million yuan, a sharp decrease over the previous year. It is estimated that in 23Q4, Northbell's revenue declined slightly, achieving net profit of 604-1.34 million yuan, and continued profit after Q3, mainly due to the company's optimization of production processes, streamlining personnel, and improving production and management efficiency. Gross margin rebounded sharply year on year, and cost ratio improved.
The turpentine business has been completely divested, and the company has restarted focusing on the main cosmetics business. The company completed the divestment of the turpentine deep processing business at the end of 2022. During the reporting period, the company's main business focused on cosmetic foundry. As a leading ODM factory in the industry, the company's revenue scale is expected to rise steadily with the gradual recovery of the cosmetics consumer side and the gradual liquidation of small and medium-sized foundries. At the same time, the scale effect is expected to bring about performance flexibility.
Risk warning: orders fall short of expectations, loss of important customers, rising raw material costs.