Performance growth for the full year of 2023 was higher than expected. Net profit reached a record high in 2023. The company achieved revenue of 967 million yuan/yoy +39.2%, net profit of 118 million yuan/yoy +319.9%, and the market share of experiential marketing in 2023 was further increased to 12.7%. The cumulative number of covered brand customers increased to 590, international customers accounted for 80%, and the renewal rate for top 25 customers was 95%. After the epidemic recovered, various marketing activities and IP businesses were held as scheduled throughout the year, and the performance recovered well. Considering the company's steady expansion strategy, we kept our 2024 profit forecast unchanged, slightly lowered the 2025 profit forecast and added the 2026 profit forecast. We expect 2024-2026 net profit of 1.4/1.7/210 million yuan, yoy +30.5%/22%/19.9%, corresponding to EPS 0.21/0.25/0.3 HKD. The current stock price corresponds to PE 6.3/5.2/4.4 times, and the performance has increased over a long period of time The logic remains unchanged; the “buy” rating is maintained.
The main business experience marketing business is in high demand. It is actively expanding other businesses in the Asia-Pacific region. In 2023, experiential marketing/digital marketing/IP expansion achieved revenue of 7.62/1.88/ 0.17 billion yuan, yoy +48.3%/+21.9%/-35.8%, accounting for 78.8%/19.5%/1.8%. In 2023, 33 high-end brand experience marketing activities were held, an increase of 15 compared to 2022. Multi-brand marketing events including Archaeopteryx, Rolls-Royce, Cartier, LV, GUCCI, DIOR, and Mercedes-Benz were successfully held. In the digital marketing business, the company used offline brand activities to drive online exposure. Performance recovery in the second half of the year was better than expected, and demand for one-stop marketing services increased. The IP development business declined, and revenue generated mainly by Shanghai Design Week and West Bank Whirlwind was included in the joint venture. Looking at the subregions: Mainland China/Hong Kong, Macau, and other Asia-Pacific regions generated revenue of 867.01 million yuan in 2023, yoy +29.5%/296.8%, accounting for 89.7%/10.3%. The company actively expanded overseas markets and successfully hosted the 2023 Hong Kong and Korea LV fashion shows, and will expand further in 2024.
Expense rate optimization improves profitability, and customers in new fields have more room to expand profitability: in 2023, the company's gross profit margin was 30.8% /yoy+1.7pct, net interest rate 12.19% /yoy+8.1pct.
The gross margins of experiential marketing/ digital marketing and promotion/ IP development were 29.7%/34.3%/41.7%, yoy+1.8pct/-0.4pct/+22.4pct, respectively. Expense rate optimization: In 2023, the company's sales expense rate/management expense rate/net other expenses ratio were 8.9%/6.1%/0.6%, yoy-3.5pct/-3.4 pct/-0.9 pct, respectively. In 2023, the company expanded its customer categories to new fields such as alcohol and beauty brands. In 2023, the proportion of new customers reached 5.3%, and there is plenty of room for customer expansion in new fields. It is expected that the proportion of new customers will increase further in 2024.
Risk warning: risk of macroeconomic fluctuations, risk of loss of customers, increased industry competition, etc.