Revenue is expected to increase 20-25% in 2023

The 23Q4 company returned -0.36 billion yuan to -0.06 billion yuan (22Q4 net profit to mother - 61 million yuan); net profit from non-return mother was -0.51 to -021 million yuan (22Q4 net profit from non-return mother -0.66 million yuan) without accounting for impairment of goodwill.

Net profit attributable to mother in 2023 was RMB 1-130 million, up 389%-536%; net profit attributable to mother was RMB 2-230 million, an increase of 878%-1025% without taking into account impairment of goodwill; net profit from non-return to mother was RMB 0.76 to 106 million yuan, an increase of 1428%-2032%.

The collaborative development of the company's multi-brand matrix is driving continuous revenue growth, which is expected to increase by 20%-25%, up 22%-27% from year 21; the revenue of all of the company's brands increased in both 2022 and 2021. In particular, the self-portrait brand, the Laurèl brand, and the IRO Paris brand all performed well in the domestic market.

The current goodwill impairment test mainly on the goodwill impairment tests formed by the company's transfer of shares in Shenzhen Qianhailin Investment Management Company and the shares of the subsidiary Tangli International Holding Company. According to the preliminary test results, the company plans to raise goodwill impairment preparations totaling about 90 million to 100 million yuan in 2023.

Qianhailin mainly owns and operates the IRO Paris brand. Overseas, it was affected by factors such as continued inflation, geographical situation, and a sharp decline in consumer demand in Europe and the US. The business performance in 2023 fell short of expectations, and due to continued strong macroeconomic pressure in Europe and the US, it is expected that Qianhai Lin's overseas profitability will decline in the future, while also taking into account the impact of the Federal Reserve's interest rate hike.

The company's offline channels have expanded efficiently in recent years

By the end of 2023, the company had about 651 stores, of which 503 were direct-run stores, a net increase of about 43 compared to the beginning of the year. Along with the normal operation of stores, the increase in stores helped increase revenue. At the same time, the company adopted a multi-brand and multi-platform development strategy online to promote good growth in online sales.

The company adopted a strategy of active expansion and increased investment in long-term development to promote continuous good revenue growth. On this basis, in 2023, with the restoration of the domestic business environment, sales of newly opened stores increased, cost ratios were optimized, and overall domestic business profits recovered well, and it is expected to return to the level of 2021.

Adjust profit forecasts to maintain “buy” ratings

The company disclosed the 2023 performance forecast and proposed impairment of goodwill, so the profit forecast was adjusted. We expect the company's net profit to be 1.21/3.08/351 million yuan in 23-25 years (previous values were 220/3.41/383 million yuan, respectively), EPS was 0.33/0.84/0.95 yuan/share, respectively, and the corresponding PE was 20/8/7X, respectively.

Risk warning: Risk of declining performance due to adverse changes in the external market environment; risk of failure to accurately grasp fashion trends; risk of products being counterfeited and illegal online shopping; risk caused by declining traffic dividends from traditional e-commerce channels and adverse expansion of new e-commerce channels; performance forecasts are only preliminary estimates. The specific financial data is based on the company's official 2023 annual report.