Core views
The company's FY23 revenue continued to grow throughout the year, and profits recovered at an accelerated pace. FY23's revenue was 585 million US dollars (yoy +19.4%). From the perspective of channels, regions, and products, the company's revenue all achieved year-on-year increases, mainly reflected in smooth market expansion and strong brand demand. There was a marked improvement in margin level, with gross profit of 46.9% (29.0% in the same period last year) and net profit to mother of US$77 million. We believe that the company has actively invested in content marketing promotion and product development for 24 years, and demand is expected to remain strong even as overseas sales have gone out of the inventory cycle.
Brief review
Revenue continues to grow, profit recovery accelerates
(1) Revenue: The company's revenue continues to grow. FY23's revenue is 585 million US dollars (yoy +19.4%). By channel, revenue mainly comes from Amazon e-commerce channels, and continues to work on non-Amazon channels. Amazon channel revenue is 456 million US dollars (yoy +11.2%), and non-Amazon channels are 128 million US dollars (yoy +61.23%); by market, revenue mainly comes from the North American market, with North American revenue of 429 million US dollars (yoy +17.4%), Europe is 125 million US dollars (yoy +17.4%) ( yoy +16.5%), Asia was US$29 million (yoy +83.4%); by product, Levoit still contributed the main revenue, of which Levoit's revenue was US$327 million (yoy +18.3%), Cosori's revenue was US$195 million (yoy +17.4%), and Etekcity was US$61 million (yoy +31.5%). From the three perspectives of channels, regions, and products, the company's revenue all achieved year-on-year growth.
(2) Profit: Accelerate profit recovery. FY23 achieved gross profit of US$274 million (yoy +92.8%), gross margin of 46.9% (29.0% in the same period last year), net profit to mother of US$77 million, a net profit margin of 13.2% (3.3% in the same period last year), and a basic profit of 6.92 cents per share (1.44 cents in the same period last year). With shipping and other costs falling, the 2022 air fryer recall came to an end. The company's FY23 product sales were strong, operating cash flow achieved significant growth, profits were released rapidly, and regional and product expansion was smooth. I am optimistic that demand for FY24 products will remain steady:
(1) The company's products and market are developing smoothly. The company actively promoted market expansion throughout the year. Among them, North America/Europe/Asia revenue was +17.4%/+16.5%/+83.4%, respectively. In addition, the company actively deployed mainstream supermarkets and stores in the region, and the share of non-Amazon channel revenue increased 5.7 percentage points to 22.0% from the same period last year. On the brand side, the company's air fryer recall incident has come to an end. Demand for Cosori air fryers is strong in Europe, the overall brand is +17.4% year over year, Etekcity sales resumed growth (+31.5% year over year, mainly driven by scale products), and Levoit +18.3% year over year (mainly driven by products such as air purifiers).
(2) I am optimistic that demand for FY24 products is still steady. The company has entered a new growth cycle, and FY24 revenue is expected to maintain positive year-on-year growth. 1) In terms of channel revenue structure, the company is actively deploying an “online+offline” dual-channel strategy. In 24, the company will focus on promotion on content marketing platforms, such as TikTok, YouTube, Instagram, etc. (by the end of '23, the company had more than 1 million overseas social media fans), thus getting rid of excessive dependence on Amazon's e-commerce channel. 2) The company continues to invest in the research and development of new products to achieve product diversity and meet the changing needs of users. 3) Costs in shipping, advertising, etc. have basically not fluctuated greatly, and many big sellers are no longer under pressure to remove inventory. FY24's revenue performance may improve year over year.
Profit forecast: We expect the company's revenue to be US$710 million and US$840 million, respectively, up 20.5% and 19.6% year-on-year, respectively; net profit to mother will be US$94 million and US$112 million.
Risk warning: Insufficient consumer retail demand due to pressure on the European and US economies; risk of rising Amazon channel commissions, freight rates, and advertising costs; risk of higher Amazon channel dependency; risk of falling company shipments due to insufficient demand on the Amazon channel; risk of rising global shipping prices; risk of reduced gross profit due to rising domestic cost side; risk of declining company inventory turnover; risk of increased competition in the European and American kitchen appliance sector; risk of new product expansion falling short of expectations; risk of additional tariff costs due to changes in trade relations between China and the US; risk of additional tariff costs due to changes in trade relations between China and the US; risk of additional tariff costs due to changes in trade relations between China and the US; risk of additional tariff costs due to changes in trade relations between China and the US; the company's channel expansion other than Amazon falls short of expectations Risk; the risk that the company will not expand as much as anticipated in other countries.