Incident Overview
The company released its 2023 annual report and pre-increase results announcement for the first quarter of '24:
Year 23: Total operating income of 1,855 million yuan (YOY -7.47%), net profit to mother of 203 million yuan (YOY +23.43%), net profit after deduction of 186 million yuan (YOY +47.78%).
23Q4: Total operating income of 557 million yuan (YOY +25.84%), net profit to mother of 51 million yuan (YOY +32.19%), net profit after deduction of 52 million yuan (YOY +218.20%).
24Q1: The estimated net profit realized to mother is 59.2521 million yuan to 64.5848 million yuan, an increase of 58.00% to 72.22% year on year; the estimated realized net profit from non-return to mother is 57.553 million yuan to 62.8857 million yuan, an increase of 122.50% to 143.11% year on year.
Analytical judgment
Revenue was under pressure in '23, but profit levels increased. Revenue side: Looking at regions, domestic offline is better than online. Although the offline industry as a whole shows a clear trend of downgrading consumption, the company launched a new series of massage chairs such as the S80 and 8800MAX, which successfully drove the growth of high-end massage chairs and stylish massage chairs, and overall offline sales grew steadily. Foreign markets were affected by the global economy and continued sluggish market demand. The number of orders from the company's main customers declined, and regional market performance varied. The Korean market declined significantly in half a year, but order volume recovered in the second half of the year. The US market gradually picked up in the second quarter, but due to inflation and banking events in the first half of the year, there was still a slight decline compared to the same period of the year. The performance of the European, Middle Eastern and Southeast Asian markets was generally stable, and the Russian market grew significantly.
Profit side: In '23, the company achieved a gross sales margin of 30.82% (YOY+4.30pct), a net profit margin of 10.93% (YOY+2.74pct); corresponding to Q4 sales gross margin of 28.42% (YoY+1.41pct), a net profit margin of 9.15% (YOY+0.44pct).
The company's sales/management/R&D expenses in '23 were 11.02%/4.23%/4.32%, respectively, +0.56pct/+0.71pct/ -0.10pct, respectively; the corresponding Q4 was 9.50%/3.98%/3.73%, respectively, and -4.77pct/+4.97pct/-0.49pct, respectively.
The 24Q1 performance exceeded expectations. We judge that high profits may benefit from 1) savings in endorsement fees; 2) exchange gains due to the devaluation of RMB; and 3) adjustments in the regional revenue structure and product structure.
Investment advice
Combined with the annual report, we adjusted the company's revenue forecast for 24-26 to RMB 21.94 billion (the previous value was RMB 20.23/22.38 billion for 24-25), which was +18.29%/+15.00%/+15.00%, respectively. In terms of gross margin, it is estimated to be 30.82%/30.82%/30.82% for 24-26, respectively. The corresponding net profit for 24-26 was 2.60/2.98/336 million yuan (previous value was 231/246 million yuan in 24-25), +28.51%/+14.25%/+12.78% year-on-year, respectively. The corresponding EPS was 1.87/2.14/2.42 yuan (previous value was 1.66/1.77 yuan in 24-25). Based on the closing price of 21.87 yuan on April 16, 24, the corresponding PE was 11.67/10.21/9.06 times, respectively, maintaining the “gain” rating.
Risk warning
Post-epidemic consumption recovery falls short of expected risks; raw material price increases risk; new product sales fall short of expectations.