Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 1.86 billion yuan, a year-on-year decrease of 7.5%; realized net profit of 200 million yuan, an increase of 23.4% over the previous year; and realized deducted non-net profit of 190 million yuan, an increase of 47.8% over the previous year. Looking at a single quarter, Q4 achieved revenue of 560 million yuan, a year-on-year increase of 25.8%; realized net profit of 50 million yuan, an increase of 32.2% over the previous year; and realized net profit of 50 million yuan after deduction, an increase of 218.2% over the previous year. In 2023, the company plans to distribute a total cash dividend of 130 million yuan, with a dividend rate of 66.4%.
Domestic market demand is weak, and orders from the South Korean and US markets are under pressure. By region, the company's domestic sales achieved revenue of 817 million yuan, a year-on-year decrease of 5.16%, mainly due to intense competition in the domestic market, compounded by pressure on domestic massage chair consumer demand; export sales achieved revenue of 1,028 billion yuan, a decrease of 8.59% over the previous year, mainly due to demand pressure in the South Korean and US markets under the influence of inflation. By product, the company's massage chairs/small massage appliances/experiential massage services achieved revenue of 1.77 billion yuan/72.11 million yuan/4.664 million yuan, respectively, -5.9%/-28.2%/-16.2% compared with the same period. Overall, massage appliances have optional consumption characteristics, so demand has shrunk under high global inflation and economic pressure, causing the company's revenue at home and abroad to decline.
The gross margin of export sales increased significantly, leading to an improvement in profitability. The company's gross margin increased by 4.3 pp to 30.8% year on year in 2023, with the gross margin of massage chairs/small massage appliances/experiential massage services being 31.1% /19.1/57.5, respectively, +4.2pp/-2.6 pp/+43.5pp; in the subregion, gross margin at home and abroad were 36.6%/26.1%, respectively, +0.5pp/6.7pp year on year, respectively. The improvement in the company's gross margin mainly comes from exchange rate effects, compounded by the increase in the company's production efficiency, driven by the increase in gross margin of export sales. In terms of cost ratio, the company's sales/management/ financial/ R&D expenses rate in 2023 was 11%/4.2%/-0.8%/4.3%, respectively, +0.6pp/+0.7pp/+0.3pp/ -0.1pp. In terms of net interest rate, the company's net interest rate increased 2.7 pp to 11% year on year in 2023, and the increase in net interest rate was mainly due to an improvement in gross margin.
Demand for massage chairs is under pressure, and the company actively adjusts overseas teams. As a leading enterprise in the domestic massage chair industry, the company has an advantageous position in the industry. The revenue side declined in 2023 due to demand pressure brought about by the weak global economy, but the company actively adjusted its overseas team structure to achieve profit side growth by improving profitability. As the economy gradually recovers, the company returns to its domestic growth trajectory, and overseas orders recover, and the company is expected to continue to grow.
Profit forecasting and investment advice. As a leader in the massage chair industry, the company actively improves profitability through cost reduction and efficiency under pressure from industry demand, and further adjusts overseas team organizational structures. The company's 2024-2026 EPS is expected to be 1.69 yuan, 1.91 yuan, and 2.13 yuan respectively, maintaining a “holding” rating.
Risk warning: risk of raw material price fluctuations, risk of concentration of major customers, risk of exchange rate fluctuations, etc.