Incident: The company recently released its 2023 performance forecast. Net profit due to mother is expected to increase 388.95% to 535.64% to 100 million yuan in 2023, and net profit after deducting non-return to mother will also increase by 1428% to 2032% to 0.76 to 106 million yuan. Excluding the impact of impairment of goodwill, net profit attributable to mother is expected to increase by 877.91% to 1024.60% to 200,000-230 million yuan.

Efficient channel expansion drove revenue growth throughout the year, and domestic business operations exceeded expectations. The company's multi-brand matrix collaborated to achieve continuous revenue growth. Revenue is expected to increase by 20%-25% to 28.7 to 3.0 billion yuan in 23 (22%-27% increase over year 21). 1) Efficient channel expansion drives revenue growth: By the end of 2023, the company's stores are expected to reach about 651, of which 503 are direct-run stores, a net increase of about 43 from the beginning of the year. In addition, the online multi-brand and multi-platform development strategy has been adopted to drive good revenue growth; 2) Domestic business operations have exceeded expectations: in 23 years, with the recovery of the domestic business environment, the revenue of all brands under the company increased compared to 2022 and 2021, especially the self-portrait brand and the Laurèl brand Also, the IRO Paris brand has performed very well in the domestic market. With increased sales and cost ratio optimization in newly opened stores, domestic business profits are expected to return to 2021 levels throughout the year. Among them, the operating profit of the domestic business in 23Q4 increased significantly compared to 21Q4.

Overseas countries were briefly pressured by factors such as inflation and the geographical situation. After fully accounting for depreciation, they went into battle lightly. Overseas was affected by factors such as inflation and the geographical situation, and consumer demand weakened drastically. The overseas business performance of the IRO Paris brand was greatly impacted and operations fell short of expectations. The company considered that continued high macroeconomic pressure in Europe and the US would cause future profitability of the IRO Paris brand to decline in overseas regions, so at the end of the year, it calculated goodwill impairment of 0.9 to 100 million yuan, reducing net profit returned to mother in 23. Net profit to mother is expected to increase by 388.95% to 535.64% to 100 million yuan in 23, and net profit after deducting non-return to mother will also increase by 1428% to 2032% to 0.76 to 106 million yuan. Excluding the impact of impairment of goodwill, net profit to mother is also expected to increase by 877.91% to 1024.60% to 2.0~230 million yuan. We believe that after fully calculating the impairment, the company is expected to go into battle lightly in 24 years.

Investment advice: Continue to promote a multi-brand strategy, and weak markets accelerate channel expansion, seize market share, and achieve good sales performance; in the medium to long term, the company's main brand is steadily expanding stores and improving store efficiency, and new brands are actively expanding stores, and the company is optimistic about long-term high-quality growth under the company's multi-brand matrix. We expect the company's EPS to be 0.34/0.66/0.78 in 2023-25, respectively, and the corresponding PE will be 24/12/10 times, maintaining a “buy” rating.

Risk warning: Market competition intensifies, overseas consumption recovery falls short of expectations, channel expansion is poor, etc.