2023 results are in line with our expectations
The company announced its 2023 results: achieved revenue of 2.76 billion yuan, a year-on-year decrease of 14.8%; net profit due to mother was 29.53 million yuan, reversing year-on-year losses; net profit not attributable to mother was 11.85 million yuan, reversing year-on-year losses, in line with our expectations, and overall operations are still under pressure.
Development trends
Revenue for the full year of 1 and 23 fell by 14.8%, and all major channels were under pressure. ① By business, the e-commerce retail business achieved revenue of 2.50 billion yuan, a year-on-year decrease of 14.3%, and brand marketing and operation services achieved revenue of 89.32 million yuan, a year-on-year decrease of 21.8%. The company believes that the main reason is insufficient control of new trends and consumer demand; the overall growth rate of its own brands exceeds 40%, with Yurong Chu and Meiyitang achieving relatively rapid growth; ② By channel, Tmall's domestic platform achieved revenue of 2.20 billion yuan, a year-on-year decrease of 26.8%. The Tmall platform achieved revenue of 58.22 million yuan, an increase of 46.19% year on year. (Duoduo, Lazada, etc.) achieved total revenue of 500 million yuan, a year-on-year decrease of 11.6%.
2. Gross margin rebounded year on year, and profit levels still have room to recover. In 2023, the company's gross margin also increased by 7.5ppt to 34.6%. Mainly due to increased discounts in the previous year, control over the scale of procurement was strengthened this year, and inventory continued to be cleared. On the cost side, the sales expense ratio increased by 2.3 ppt to 24.7% in 2023. We think it was mainly due to the impact of operating leverage; management and R&D expenses increased by 0.2 ppt to 4.7%. Under the combined influence, the company's net profit margin increased by 5.4ppt to 1.1% in 2023, and there is still room for recovery in profitability.
3. Brand, category and channel expansion continue to advance. ① Expanding brands and expanding categories: Over the past 23 years, the company has continued to expand its operating matrix. It has successively reached cooperation with brands such as Han Gao Jiaqing, Oubonqi, and PMPM, and introduced brands such as PerfectBowl and Lu Xue to develop food categories. ② Platform expansion: The company expanded emerging channels by strengthening cooperation with KOLs in '23. By the end of '23, the number of small Douyin stores had also increased by 12 to 48 during the period, and the share of emerging channel revenue increased by about 2ppt to 15% + throughout the year.
Profit forecasting and valuation
Considering the pressure on the company's channels and insufficient grasp of new consumption trends, the profit forecast for 2024 was lowered by 34% to 149 million yuan, and a profit forecast of 166 million yuan for 2025 was introduced. The current stock price corresponds to 22/20 times the price-earnings ratio for 2024/25. Maintaining an outperforming industry rating, the target price was lowered by 38% to 10 yuan based on profit forecast adjustments, corresponding to a price-earnings ratio of 27/24 times in 2024/25, with 22% upside compared to the current stock price.
risks
Brand customer loss; high dependence on a single channel; increased industry competition; new brand expansion falls short of expectations.