Core views:
The company announced its 23-year results: revenue increased 7.0% to 27.60 billion yuan, and net profit to mother decreased 21.6% to 3.19 billion yuan, in line with expectations. In addition, the company's turnover increased by 10%-20% in 2013. Among them, the 23Q4 company's large cargo volume also increased by 20% to 30% lower, which is in line with expectations.
The weak recovery in terminal consumption has put pressure on net interest rates. According to the results announcement, (1) The high-level market layout for offline channels has basically been completed, and wholesale revenue is under pressure in the context of inventory clearance. In '23, large wholesale/direct sales revenue increased by 1%/29%, and offline channels for large wholesale/large goods direct management/children each changed by 123/+68/+120, but large wholesale/large direct sales stores each changed year over year - low orders/+ low double, improved direct sales discounts and increased share of direct sales revenue respectively led to a 0.2/0.4 pct increase in the Group's gross margin. The company's core business store occupancy rate increased to 90% in '23. (2) E-commerce revenue increased by 1% in '23, the same store reduced the number of units, and its average discount deepened the low number of units, which had a negative impact of 0.8 pct on the Group's gross margin. Furthermore, the Group's gross margin remained stable year-on-year in '23, maintaining 48.4%, but factors such as direct-run stores and e-commerce caused the Group's operating profit margin to decrease by 6.0 pct to 12.9%.
Inventory is improving as scheduled, operating capacity is healthy, and we are optimistic about the healthy growth of the company's future performance. According to the results announcement, as of the end of '23, the company's inventory sales ratio had dropped to 3.6 months. The inventory ratio and storage age were at a healthy level, and the phenomenon of trading was further mitigated. In addition, the company's net operating cash inflow also increased 19.8% to 4.69 billion yuan in '23, with healthy operating capacity. As inventory clean-up comes to an end in '24, discounts are expected to improve, and gross margin has room for upward improvement. At the same time, the company has completed a high-level market layout and has been recognized for its ultra-lightweight+red tou+flying electric professional matrix, which is beneficial to medium- to long-term development.
Profit forecasting and investment advice. The company's net profit for 24-26 is estimated to be 33.4/37.3/4.14 billion yuan. Referring to comparable companies, 18 times PE over 24 years is given, corresponding to a reasonable value of HK$25.7 per share, maintaining a “buy” rating.
Risk warning. There is a risk of continuing macroeconomic pressure, price wars, and declining operational efficiency.