Incidents:

The company released its 23-year performance forecast. Net profit without return to mother is estimated to be between RMB 28,320 million and YOY +124%-+156%; net profit after deducting net profit of RMB 2.6-30 billion, yoy +169%-+210%; of these, 23 Q4 are expected to have net profit of RMB 10-140 million, compared with net profit of RMB 5.81 million after net profit of 22Q4; net profit net profit of RMB 0.65 to 105 million yuan compared to 22Q4 net profit loss of 1.32 million yuan.

The main reasons for this change in performance:

① The multi-level brand matrix system for the company's independent brands has been further improved, brand assets continue 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-profit brands continues to rise. Continuously pay attention to changes in the market environment, dynamically optimize sales models, and increase overall gross profit;

② Adhere to refined operations on the premise of focusing on long-term healthy business development, continuously improve management efficiency, continuously improve organizational system construction, improve cost control effectiveness, and decrease cost ratio; ③ The impact of non-recurring profit and loss on current net profit in 23 years is estimated to be about 20 million yuan.

Comment:

Shuiyang Co., Ltd. continued to develop with high quality in 23 years. Under the normal external environment, the Shuiyang internal brand completed the complete layout of luxury, middle class, and mass production. According to Cicada Mama and Magic Mirror market data, Ifidan's online sales of GMV reached 660 million yuan in 23, which is expected to draw on Iffidan's successful experience in 24 to further incubate brand assets such as Pergejo (French high-end cinema brand); in the 23-year period of adjustment, it is expected that Yifidan will reshape the brand in 24; Ifidan is expected to see the CP reshaping of the brand in '24; Ifidan is expected to see CP reshaping the brand in '24; Ifidan is expected to see CP reshaping the brand in '24; Ifidan is expected to see CP reshaping the brand in '24; As for the volume of other categories in the series, it is recommended to pay attention to sunscreen, cream, serum and member repurchases, and introduce body care products. The brand's potential is expected to continue to improve.

Investment advice: I am optimistic that the company will continue to advance R&D and innovation, further consolidate its multi-brand mentality, and gradually release the profit side in the future. Net profit due to mother in 23/24/25 is expected to reach 30/40/4.7 billion yuan, corresponding to 20.5/15.4/13.0xPE, maintaining a “buy” rating.

Risk warning: Risk of customer acquisition falling short of expectations, risk of R&D falling short of expectations, and increased risk of competition; performance forecasts are only preliminary accounting results, please refer to the annual report for '23