Incident: On March 11, the company released its 2023 performance report. In 2023, the company achieved operating income of 967 million yuan/year on year +39.2%, and net profit to mother of 108 million yuan/year on year +357.0%. The performance was basically in line with expectations.
The 2023H2 business recovery was better than expected. Revenue: During the reporting period, the company achieved experiential marketing revenue of 7619.72 million yuan/year on year, accounting for 78.8%; digital marketing and promotion service revenue of 18.237 million yuan/year on year +21.9%, accounting for 19.5%; IP development business achieved revenue of 17.022 million yuan, with revenue of 265.31 million yuan in the same period last year (the year-on-year decline was mainly due to the revenue of Shanghai Design Week included in the profits of affiliated companies. The year-on-year decline was mainly due to the revenue of Shanghai Design Week being included in the profits of affiliated companies.
Among them: 1) experiential marketing services, successfully completed multi-brand activities including Archaeopteryx, Cartier, Chanel, DIOR, GUCCI, LV, and MERCEDES-BENZ, once again proving its professional ability, accounting for 78.8% of annual revenue, and solid main business demand; 2) Digital marketing business: providing online marketing services for multiple brands, with revenue recovery in this segment better than expected in the second half of the year, mainly due to increased customer demand for one-stop (online plus offline marketing) services; 3) IP expansion business, Shanghai Design Week, West Coast, etc. Office, this category Activities are included in the financial statements as profits of associated companies, so IP business revenue declined. In fact, it is estimated that the company achieved tens of millions of IP revenue during the reporting period.
Cost control has improved, and full-year performance has increased. During the reporting period, the company's cost control improved: 1) gross margin increased by 1.7 pct to 30.8% year on year; 2) While revenue increased, total sales expenses and management expenses remained stable throughout the year, excluding one-time projects, and the cost ratio declined during the period. Among them, the sales expenses rate/management expense ratio/net other expenses ratio were -3.5pct/-3.4pct/-0.9pct, respectively; 3) Overall, the company achieved net profit of 108 million yuan in 2023, +357% year-on-year, with a high increase in annual performance. As a leading pan-fashion data interactive marketing company in China, the company has a rich team experience, a stable customer base, and outstanding advantages of full online and offline integration; its luxury experiential marketing business has an advantage over peers. According to the company announcement, its main business, experiential marketing, had a market share of 12.7% in 2023, and continued to increase compared to 2022 (market share was about 10% during the same period); and with the accumulation of original brands and personnel, it conforms to the trend of online marketing and diversification. Omni-channel integration and continuous expansion promote collaboration.
Investment advice: In the long run, it is a long-term trend for top international brands to increase the domestic market and rise of domestic brands. The company will benefit as a pan-fashion data interactive marketing group that has established long-term cooperative relationships with top brands. It is continuously increasing, promoting omni-channel integration, and consolidating its competitive advantage. We expect the company to achieve operating income of 1,153 billion yuan/1,368 million yuan and net profit to mother of 133 million yuan/154 million yuan in 2024-2025, respectively. The current stock price corresponds to PE 6.4 times/5.5 times, respectively, maintaining a “buy” rating.
Risk warning: Competition in the industry has seriously intensified; consumption falls far short of expectations.