Introduction to this report:
The company promotes loss reduction through optimized business structure and fee control measures; we continue to be optimistic that the company will rely on fitness content+sports products to provide users with one-stop solutions, and future development can be expected.
Summary:
Maintain an increase in holdings. In 2023, the company achieved revenue of 2,138 billion yuan/ -3.3%, and an adjusted loss of 295 million yuan (loss of 667 million yuan in the previous year) was better than previously anticipated. Considering that the company will appropriately increase its investment, the adjusted net profit to mother was lowered to 2024-25 million yuan (originally -2.09/034 million yuan), and the adjusted net profit to mother is predicted to be 81 million yuan in 2026, maintaining the increase in holdings.
The virtual event business is driving growth, and the penetration rate of subscription members is steadily increasing. 1) 2023 Revenue Segment:
Private label sports products of 946 million yuan/ -16.8% due to factors such as cost reduction and efficiency, decline in e-commerce consumer confidence, and reduction in indoor sports product consumption, etc., online membership and paid content of 996 million yuan/ +11.4% due to increased virtual events, advertising and other 196 million yuan/ +8.6%; 2) Average monthly active users of 297.56 million/ -18.2%, and 3.193 million subscription members/ -11.8% due to factors such as external environmental impact in early 2023, high base and cost control strategies /+0.78pct steadily increased; 3) The average monthly revenue of monthly active users also increased by 17.6%.
Gross margin has increased, and more measures have been taken to achieve significant cost control. 1) Gross profit margin of 45% /+4.27pct in 2023, including private brand sports products 27.7% /-0.43pct, online membership and paid content 62.8% /+8.58pct, advertising and other 37.6% /-15.1pct; 2) adjusted loss rate -13.8% /+16.4pct; 3) By reducing marketing activities and improving user acquisition rates, optimizing logistics and warehousing costs, and optimizing personnel structure, the fee control effect is remarkable, with a period cost ratio of 62.4% /-10.4pct, including sales/administration/contract fulfillment /R&D cost rates were 26.6/9.79/7.28/21, respectively, -2.59/-1.32/-1.84/-3.24pct, year-on-year, respectively.
Enrich modules such as online fitness content and virtual events, and further improve the sports product matrix. 1) By the end of 2023, the total number of recorded and broadcast courses offered by the platform to paid members had increased to 4225 sessions/+2352 sessions. A number of new self-developed courses and updated PGC series courses had been launched. The number of exercises for members also increased by more than 200%; 2) Launched “Let's Run, Trailblazer! “Star Dome Railway Online Charity Run” and “Light and Night Love Online Challenge” expanded their popularity among two-dimensional game fans, and the average revenue of paying users reached a new high, with an increase of more than 30%; 3) Focusing on optimizing the design, functionality and cost structure of smart devices, and launching new self-powered smart bikes, the C1 Mini+, B4 Lite bracelet, the first A1 rowing machine, and K4 treadmill, which were well received; 4) By the end of 2023, the number of realistic cycling routes with a theme had expanded to 74.
Risk warning: supply chain risk, increased industry competition, risk of losing users, etc.