Event: On April 15, 2024, Rongtai Health released the 2023 Annual Report and the first quarter results forecast for 2024. In 2023, the company achieved revenue of 1,855 million yuan (-7.47%); net profit to mother was 203 million yuan (+23.43%). In a single quarter, 2023Q4 achieved revenue of 557 million yuan (+25.84%) and net profit of 51 million yuan (+32.19%) to mother. 2024Q1 is expected to achieve net profit of 0.59-65 million yuan (+58.00%-72.22%) and net profit without return to mother of 0.58 to 63 million yuan (+122.50%-+143.11%). The company announced the 2023 profit distribution plan.
2023Q4's revenue grew rapidly, and domestic and international two-wheel drive sales increased. 1) Quarterly: In 2023Q4, the company's revenue was 557 million yuan (+25.84%), achieving a relatively rapid growth rate, or co-driven by domestic and foreign markets. 2) Subregions: The company's domestic and export sales revenue in 2023 was 817/1,028 million yuan, respectively, -5.16/ -8.59% year-on-year. There was a decline throughout the year or a large gap in the first three quarters, and recovered in the fourth quarter. a) Overseas: 2023H2 orders increased in the Korean and US markets, and there was a high increase in the Russian market throughout the year. Targeting the European and Southeast Asian markets, which have high growth momentum, the company's new split of independent team management and differentiated operations are expected to enable long-term growth. b) Domestic: Offline high-end massage chairs and trendy massage chairs have bucked the trend, and online Douyin performed well.
The profitability of 2023Q4 has increased, reflecting the advantages of cost reduction and efficiency. 1) Gross profit margin: 2023Q4 gross profit margin of 28.42% (+1.40pct), or optimization of the company's product structure, showing results in cost reduction and efficiency. 2) Net interest rate: 2023Q4 net interest rate 9.13% (+0.43pct), profitability improved. 3) Expense side: 2023Q4 sales/management/R&D/finance expenses rates were 9.50/3.98/3.73/ -0.42%, respectively, -4.77/+4.97/-0.49/ -1.34pct, respectively. The sales expense ratio significantly improved the main company's accurate control of marketing investment.
In 2023, a high percentage of dividends paid back to shareholders, and the high dividend ratio highlights value. The company announced a profit distribution plan for 2023. Based on 135 million shares, it plans to distribute a cash dividend of 10 yuan (tax included) to all shareholders, with a total cash dividend of 135 million yuan (tax included), with a dividend rate of 66.44% (+25.15 pct year over year), calculated at the closing price on April 15, corresponding to a dividend rate of 5.03%. The high dividend highlights the company's value. At the same time, the company transferred 3 shares for every 10 shares to all shareholders using its capital stock, for a total increase of 40.4027 million shares. Continue to give back to shareholders to boost confidence and help long-term healthy development.
Technology research and development continues to innovate, and channel changes drive performance growth. 1) R&D side: In 2023, the company completed a total of 15 R&D projects, adding 15 invention patents, 67 utility model patents, 11 design patents, and 11 software copyrights, and the R&D strength continues to improve. 2) Production side:
The supply chain has standardized equipment management, and 16 process changes have been completed in 2023; the construction of the WMS system for the Shanghai factory has been completed, and logistics operations and management efficiency have been improved; it is planned to build a factory in Thailand, and a memorandum of cooperation has been signed with the Suvarnabhumi Asian Industrial Park in Thailand, or to effectively avoid the risk of trade uncertainty while enabling overseas independent brand building. 3) Channel side: In 2023, the company increased investment in Douyin resources through brand self-broadcasts, etc., and actively deployed full-price products, and direct sales revenue grew rapidly; the Momoda brand launched an offline distribution store model, and the overall sales trend improved.
Investment advice: On the industry side, with the recovery of overseas demand, domestic policy support for the pension industry, aging issues, and rising health needs of residents, the size of the massage equipment market is expected to continue to grow. On the company side, high-quality overseas customers are actively expanding, capacity building strengthens resilience to risks; domestic product structure continues to be optimized, new channels are being deployed at an accelerated pace, cost reduction and efficiency are continuously strengthened, and revenue performance is expected to continue to grow. We estimate that in 2024-2026, the company's net profit to mother will be 2.57/3.13/370 million yuan, the corresponding EPS will be 1.85/2.25/2.66 yuan, respectively, and the PE corresponding to the current stock price will be 11.85/9.72/8.21 times, respectively. First coverage, giving a “buy” rating.
Risk warning: fluctuating raw material prices, concentration of major customers, exchange rate fluctuations, increased industry competition, etc.