occurrences
Baby-Friendly Room released its 2023 annual report. In 2023, the company achieved revenue of 3.333 billion yuan/ -7.95%, net profit to mother of 105 million yuan/ +21.84%, net profit after deducting non-return to mother 66 million yuan/ +22.14%, and non-recurring profit and loss of 39 million yuan, mainly from government subsidies. Q4 In a single quarter, the company achieved revenue of 911 million yuan/ -8.76%, net profit attributable to mother of 58 million yuan/ +40.85%, after deducting net profit of 45 million yuan/ +40.97%. A cash dividend of $3.5 (tax included) is proposed for every 10 shares.
Comment:
Actively streamlining inefficient stores, putting pressure on revenue performance. In 2023, the company's revenue was 3.333 billion yuan/ -7.95%, by channel: 1) Store sales revenue of 2,432 billion yuan/accounting for 73.01%/-5.90%, of which comparable store efficiency was -6.73%, number of stores -0.42%. The company took the initiative to reduce inefficient stores, compounded by external influences such as the decline in newborns, and offline revenue declined; 2) E-commerce revenue of 617 million/ accounting for 18.52%/-14.33%. Some online channel revenue decreased, and self-operated third-party platforms showed excellent performance, with a year-on-year increase of 77%. The audio platform increased 290% year over year; 3) Other revenue was 282 million/accounting for 8.47%.
Operational efficiency has improved, and cost rates have declined steadily. In 2023, the company's expense ratio was 25.18% /-0.47pct, of which: 1) sales expenses 693 million yuan/ -8.55%, sales expenses rate 20.81% /-0.14pct. The company continued to improve human efficiency and operational efficiency by adjusting the store area and establishing an efficient operating model; 2) Management expenses 112 million yuan/ -9.51%, and a management cost ratio of 3.35% /-0.06pct, mainly due to the use of information technology to improve the level of automation to effectively control labor costs; 3) Financial expenses of 34 million/- 27.93%, financial expense ratio 1.01% /-0.28pct. The decline in financing scale and financing interest rate reduced interest expenses.
Investment advice: The company will actively expand offline stores, accelerate the integration of online and offline resources, promote comprehensive coverage of sales channels, and fully empower digital construction. The number of stores and single store benefits are expected to grow steadily. Considering that the company is still in the channel optimization stage and revenue forecasts are adjusted, revenue for 2024-2026 is estimated to be 3,524 million/3,954 million/3,989 million, respectively, and net profit attributable to mother is 110 million/127 million/140 million, respectively. The corresponding PE is 18 times/16 times/15 times, respectively. Maintain an “Overweight” rating.
Risk warning: Market competition intensifies; store expansion falls short of expectations; performance forecasts and valuation judgments fall short of expectations.