Incident Overview
The company announced the 23 annual results forecast. It is estimated that 2023 revenue/net profit attributable to mother will be 20.0/0.68-0.78/0.688-0.78 billion yuan, up 2.43% /- 46.07% year-on-year to -52.98%/474.10%-529.12%. The performance is lower than the agreed market expectations, but it is mainly affected by non-financial projects, and the net profit due to China Finance Trust's calculation of RMB 0.16 million will be affected by the net profit attributable to mother of about RMB 804 million, exceeding our previous estimate of 80 million yuan. Among them, 23Q4 revenue/net profit attributable to mothers/net profit after deducting non-net profit were 569/0.26 billion yuan/0.39-0.49 billion yuan respectively, up 27.4% /regular/corrected year-on-year. The deducted non-net interest rate was 6.9%-8.6%, which is a further improvement over the 23Q3 deducted non-net interest rate of 6.8%.
Analytical judgment:
Revenue growth was mainly driven by high automobile growth in the second half of the year. The company achieved a 2.43% year-on-year increase in revenue. Among them, sales volume of main products increased 4.92% year on year, sales revenue of main products increased 5.82% year on year, and unit sales price increased 0.86% year on year.
The decline in net profit attributable to mother was mainly affected by the economy. 1) In the same period in '22, it was confirmed that the net revenue of 159.3697 million yuan was collected from the old factory area on Jinzhai Road; 2) China Finance Trust accrued a loss of about 200 million yuan; 3) The overseas subsidiary Amway Vietnam lost about 0.2 billion yuan. As customer orders gradually increased and production capacity was gradually released, Amway Vietnam's sales volume in the second half of the year increased by about 316% compared to the first half of the year, and the trend is positive.
There is a clear trend of quarterly improvement in deducted non-net interest rates. 23Q1/2/3/4 deducted non-net interest rates were -4.15%/2.04%/6.82%/6.85%-8.61%, respectively. The quarterly improvement trend was obvious, mainly benefiting from: 1) The share of high unit price, high gross profit, and high added value products increased. The gross profit margin of main product sales for the whole year was 21.03%, up 4.57PCT year on year; of these, 23H2 main product sales gross margin was 22.89%, up 8.17PCT year on year; 2) The government subsidy for '23 was about 19 million yuan.
Investment advice
We judge that (1) the 24Q1 boom is expected to continue the recovery since the second half of '23. Not only is the automobile business growing at a high rate, but the sports category has basically ended inventory removal and is expected to usher in an inflection point in inventory; (2) the increase in the share of high-margin products such as overseas customers, automobiles, and electronics will continue to improve the company's net interest rate; (3) the remaining 2 production lines in Vietnam are expected to be put into operation this year, and it is expected that losses will be reversed in 24.
Considering that the sports category is still out of inventory in '23, but is expected to be replenished in '24, the revenue forecast was lowered to 23.01/25.49/2,945 billion yuan to 20.00/24.60/2,933 billion yuan; net profit to mother in '23 was reduced by 81 million yuan to 72 million yuan, and net profit to mother remained unchanged at 2.01/264 million yuan in 24 and 25, corresponding to the reduction of EPS 0.37 to 0.33 yuan in '24 and 25. The closing price of 11.2 yuan on January 30, 2024 corresponds to PE of 34/12/9X. In the medium to long term, we are still optimistic about the improvement in customer structure and profitability brought about by water-based, solvent-free products, and maintain a “buy” rating.
Risk warning
Customer expansion falls short of expectations; production capacity expansion falls short of expectations; risk of financial investment shareholders' holdings reduction; systemic risk.