Revenue increased significantly, and losses were drastically reduced in '23, maintaining the “increase in holdings” rating
On January 30, the company released a performance report. In 2023, the company expects to achieve revenue of 1,125 to 1,375 million yuan, +25.58% to 53.48%, in line with our expectations (1.28 billion yuan, +42.93% year over year); realized net profit of -3550 to -53.3 million yuan, reducing losses of 71.21% to 56.77% year on year; deducting non-net profit of 41.9 to 62.9 million yuan, a year-on-year loss reduction of 67.74% to 51.58%. Affected by the slow recovery in consumption, we adjusted the company's 24-25 EPS to 1.28/1.70 yuan respectively (previous value: 1.41/1.88 yuan). Benefiting from channel strategy adjustments, the company's revenue increased significantly year-on-year. Although the company did not achieve profit in 23 years due to cost investment, we believe that the company is expected to turn a loss into a profit in 2024. As of 2024/2/1, the comparable company Wind unanimously expected the average PE value to be 16x. Considering that brand building is still in the early stages, there is some uncertainty about cost investment. The valuation premium was lowered, and the company was given 25xPE in 2024, corresponding to a target price of 32 yuan (previous value of 42.3 yuan), maintaining an “gain” rating.
Revenue grew significantly in '23, and the company deepened its multi-channel layout
The company expects to achieve revenue of 11.25 to 1,375 billion yuan in 23, +25.58% to 53.48% year-on-year, with a significant year-on-year increase. With the gradual recovery of domestic consumption and a steady recovery in demand, the resumption of offline travel has driven the company's offline store revenue growth in an orderly manner. In addition, the company is deepening its multi-channel layout: 1) making strategic investments in the Douyin channel, using the Douyin channel to introduce traffic, while being driven by diversion from other e-commerce platforms and offline direct stores; 2) promoting franchise channel construction in an orderly manner and officially launching a new business model for provincial retail service providers to join. Driven by the sharp growth of the Douyin channel and the continued expansion of the franchise channel, we are optimistic about the marginal improvement and elasticity of the company's future revenue.
Losses were drastically reduced year on year in '23, and profitability gradually improved
Over the past 23 years, the company has continued to deepen cost reduction and efficiency, and improve management efficiency. On the cost side, since 2023 is a strategic year for the company's brand building, related channel expenses are heavily invested, and the company spends more on sales expenses. Expense investment affects profits in the short term, and the company has not been profitable for 23 years; however, in the long run, investment in sales expenses is conducive to further stabilizing the brand moat. However, compared with the same period in '22, the company's net profit reduced losses by 71.21% to 56.77% year-on-year, and profitability gradually improved.
Adhering to the “Traditional Chinese Medicine X Technology” strategy, the breakthrough of large single products brings about flexible performance. In the current context of weak consumption recovery, the company takes users and products as the center, preempts layout, seizes timing, and seeks change in a steady state. Since the beginning of the year, the company has adopted a “big single product” strategy and launched new products such as the Neck5 Lite neck massager and the SeeX2 Pro eye massager, deeply understanding consumer pain points and enriching the product matrix based on consumer demand.
Risk warning: increased market competition; risk of high inflation overseas; risk of new products falling short of expectations.