Description of the event
The company disclosed its 2023 performance report: In 2023, the company achieved operating income of 1,276 billion yuan, a year-on-year increase of 42.38%, achieved net profit to mother of 478.986 million yuan, a year-on-year loss of 765.337 million yuan, and realized deducted non-net profit of 558.986 million yuan, and a year-on-year loss of 75.1239 million yuan.
Incident comments
Under the low base, the company's quarterly revenue grew at a relatively high rate. The increase declined month-on-month. Due to the launch of new products and increased investment in new channel development, there was still a loss in phase profit, and losses were drastically reduced from the previous year. The company achieved 42.38% year-on-year increase in revenue in 2023, with Q1/Q2/Q3/Q4 year-on-year growth rates of -7.93%, 76.08%, 79.81% and 35.22% respectively. Among them, the fourth quarter was still able to achieve high apparent growth, mainly due to the relatively low base level for the same period last year. During the reporting period, annual revenue growth was significant, mainly due to the company's adherence to the “Traditional Chinese Medicine x Technology” strategy as the core, leading the layout, seizing opportunities, and seeking change in a steady state. With the explosive growth of the Douyin channel, the gradual adjustment of the franchise model, and product innovation consolidated the moat, the breakthrough of large products drove performance, such as the Neck N5 Mini Shoulder and Neck Massager, See5K Smart Eye Care Device for Kids, Seek Pro Hot and Cold Eye Massager, Neck 5 Lite Neck Massager, Scalp 3 Scalp Massage Comb, New products such as the Neck D5 neck massager have brought strong revenue growth momentum to the company. Direct store sales have resumed. At the same time, “pop-up programs”, “traditional Chinese medicine craft activities”, “fast massage programs”, “Douyin local life”, and “Meituan flash shopping” have been introduced offline. Through various marketing models, the sales scale has been rapidly increased through multiple channels. On this basis, in the expansion of new products and the restoration of offline channels, the gross margin of the company's products increased, but due to the explosive growth of the Douyin channel, the company still lost 558.986 million yuan in annual deductions of non-net profit. Combined, the company still lost 558.986 million yuan in annual deductions of non-net profit. Among them, loss after deducting non-net profit in the fourth quarter of a year was 34.1367 million yuan, and operating efficiency gradually ushered in an upward trend.
In addition to increasing investment in Douyin channels and optimizing direct store operation strategies, the company is also actively adjusting and optimizing the franchise model, which is expected to further open up the incremental market. In addition to the original multi-channel customer acquisition channel on the Internet, the company signed contracts with two provincial retail service providers in Shandong and Jiangsu, and officially launched a new business model for provincial retail service providers to join. Through the existing channels of provincial retail service providers, the company will effectively develop blind spots in the market, especially penetration and development into the second- and third-level and even sinking markets, and gradually penetrate the layout at multiple outlets in the province through the excellent market expansion capabilities of provincial service providers, “with a point of view”, radiate brand influence to core areas such as surrounding office buildings and residential areas, and give full play to the synergy between brands and stores to better open up segmented incremental markets.
Investment advice: The company is deeply involved in smart portable massagers, and has its own brands “Breo” and “Easy”. The products bring users a good health experience, and have formed a significant domestic and foreign brand effect. On this basis, the company actively launches new products and optimizes channel strategies, which are expected to achieve new high-quality development. The company's net profit for 2024-2025 is 1.01 million yuan and 135 million yuan, respectively, corresponding to 2024-2025 PE, which is 24.5 and 18.3 times, respectively, maintaining a “buy” rating.
Risk warning
1. Macroeconomic fluctuations bring about the risk of falling demand;
2. Increased competition brings the risk of reduced profit efficiency.