Introduction to this report:

The company's domestic and offline store structure continues to be optimized; the adjustment of overseas channels has come to an end, the operating efficiency of all aspects is expected to improve, and subsequent performance is expected to improve and increase capital.

Key points of investment:

The investment proposal considers that the industry is still in the process of slow and weak recovery. We lowered the 2024-2025 and added 2026 profit forecast. The 2024-2026 EPS is expected to be 0.30/0.37/0.45 yuan (2024-2025 original value 0.33/0.40 yuan, reduction of -9%/-8%), +35%/+26%/+20%. The reference industry gave the company 27xPE in 2024, downgraded the target price to 9 yuan, and the “gain” rating.

Performance summary: The company's 2023 results are in line with expectations. The company's 2023 revenue was 665 million yuan (-17%), net profit of 0.71 million yuan (+52%), net profit after deducting non-return to mother of 0.64 million yuan (+59%); of these, Q4 revenue was 193 million yuan (-28%), net profit due to mother was 119 million yuan (-6%), and net profit from non-return to mother was 18 million yuan (-5%).

The OEM/ODM business maintained positive growth, and the own-brand business declined, and the performance was in line with expectations. In terms of Beiding's own brand business, the company's private brand sales revenue in 2023 was -22% year-on-year, accounting for 79% (-5pct). Among them, domestic and export sales revenue of independent brands was -16% and -65%, respectively. Among them, Q4 domestic sales and export sales revenue were -26% and -81%, respectively. The overall revenue of the company's own brands is under further pressure. Adjustments in overseas business channels and operating models of independent brands have had a structural impact on Beiding's overseas business revenue. In terms of OEM/ODM business, OEM/ODM revenue in 2023 was +9% YoY, of which 23Q4 revenue was +37% YoY. Foundry revenue rebounded as the inventory levels of major foundry customers recovered.

Looking ahead to 2024, the company's domestic sales revenue is expected to increase as the company's offline store structure is optimized, the number of distribution stores increases, and new products are launched. Furthermore, it is expected that with the adjustment of overseas channels, the operational efficiency of various links and the profitability of overseas business will be improved.

Risk warning: The risk of raw material price fluctuations and increased market competition are putting pressure on profit margins.