The net profit for 23Q4 is expected to exceed the same period in '21. The company expects to achieve net profit of 1-130 million yuan in 23, an increase of 388.95%-535.64% over the previous year, and net profit deducted from non-return to mother of 0.76 to 106 million yuan in 23, an increase of 1428-2032% over the previous year. Without considering the impact of goodwill impairment charges, net profit to mother is expected to be achieved in '23 billion yuan, an increase of 877.91% to 1024.60% year on year; 23Q4 achieves net profit to mother of 0.64 to 94 million yuan, which exceeds the same period in '21 (60 million yuan).
Marginal restoration of the retail environment, and active expansion strategies reflect operating leverage. Determine the main reason for the advance increase in net profit attributable to mother:
① Revenue pre-increased 20-25% in '23 (22-27% compared to '21:22-27%). All of its brands achieved growth, and Self-Portrait, Laurèl, and IRO Paris performed well in the domestic market. ② Channel expansion, offline:
By the end of '23, the number of stores is expected to reach 651, including 503 direct-run stores, a net increase of about 43 from the beginning of the year; online: multi-brand multi-platform development strategy, good online revenue growth. ③ Focus on long-term and active expansion to drive continuous good revenue growth, increase sales of newly opened stores in 23 years, and optimize cost rates. Domestic business profits are expected to return to the level of 21.
External demand is weak, and preparations for impairment of goodwill are carefully calculated. In '23, the company plans to prepare a goodwill deduction of about $90-1 billion for the goodwill impairment formed by the previous transfer of shares in Qianhaillin and its subsidiary Tangli International. Mainly due to weak external demand in Europe and the US, IRO Paris' overseas business performance was greatly impacted and did not meet full-year expectations. Furthermore, macroeconomic pressure on Europe and the US is high, and profitability may decline in the future. We believe that the company's calculation based on the principle of prudence fully anticipates the business risks that may be brought about by the macro environment, dragged down apparent performance in the short term, and is expected to go light in the long run.
Profit forecasting and valuation. We expect the company's 2023/2024 net profit of 125 million yuan/309 million yuan, giving the company a 2024 PE valuation range of 12-15X, corresponding to a reasonable value range of 10.04-12.55 yuan/share, and maintain a “superior to market” rating.
Risk warning. The recovery of the retail environment fell short of expectations, the speed of opening stores fell short of expectations, and changes in the international environment affected overseas business.