The company announced its 2023 annual report on April 11, 2024. In 2023, it achieved revenue of 5.254 billion yuan, an increase of 21.82%, net profit to mother of 698 million yuan, an increase of 52.11%, after deducting non-net profit of 605 million yuan, an increase of 61.61%. Both revenue and net profit to mother achieved high growth. Maintain a buy rating.
Key points to support ratings
In 2023, multi-brand efforts will drive rapid growth in total revenue. The company's revenue in 2023 increased 21.82% year-on-year to 5.254 billion yuan, and net profit to mother increased 52.11% year-on-year to 698 million yuan. Among them, Q4 single-quarter revenue and net profit to mother showed good growth elasticity in the context of a low base, which was 15.86/143 million yuan respectively, up 24.46%/92.04%. By brand, the main brand of News Bird's revenue for the full year of 2023 was 1,730 billion yuan, an increase of 17.18%. In terms of products, the company continued to optimize and upgrade core categories of suits and expand trend lines such as sports suits. On the channel side, continue to promote the big store plan and optimize the channel structure. The net number of stores opened was 13 to 817 throughout the year. Haggis's revenue in 2023 also increased by 24.12% to 1,758 billion yuan. In terms of products, the brand focused on the three major scenarios of commuting, holidays, and sports, and launched a series of products such as ICONIC series, HRC series, and plant printing and dyeing to broaden the price range for key categories. In terms of channels, the brand promoted the implementation of the big store plan, actively expanded high-quality franchisees, accelerated channel decline, and opened 79 new stores during the reporting period; Treasure Bird was deeply involved in the field of professional wear, strengthened product design and expanded major customers, and revenue increased 15.87% to 1,039 billion yuan.
Le Fei Ye/Chemiche also grew rapidly. Revenue in 2023 was 262/179 million yuan respectively, up 40.50%/30.06%. From an online perspective, the company is actively following the diversified online channel changes of new media. It lays out Douyin and video live streaming delivery services. Online channel revenue also increased 0.75% to 804 million yuan, and overall remained steady against the backdrop of increased competition in online channels.
Increased gross margin+cost reduction and increased efficiency have led to a significant increase in net profit margin. In 2023, the company's gross margin also increased by 1.97pct to 64.71%, of which Q4 gross margin was 64.93% and 4.74pct. We judge that the increase in the share of direct sales channels and the optimization of discounts for various brands drove a significant optimization of gross margin. The company actively controlled fees. The fee rate in 2023 was 38.66%, down 1.02pct. The increase in gross margin and cost optimization drove a net margin increase of 2.83 pct to 13.87%. The number of inventory turnover days during the reporting period was 236 days, a year-on-year decrease of 32 days. Operational efficiency led to inventory optimization. Operating cash flow also increased 123.87% to 1.154 billion yuan. The company's cash flow situation was relatively good, with a net present ratio of 1.65.
The main brand increases quality and efficiency + Haggis maintains the trend of opening stores, and multiple brands drive the company's growth. The main brand of News Bird continues to improve product competitiveness, launch sports suits to increase consumer recognition, and optimize channels to help improve individual stores; the Haggis brand expands sports fashion products and expands accessories categories, which is expected to drive further brand growth. Furthermore, the growth of the new brand is gradually accelerating after management and positioning adjustments, and it is optimistic that multi-brand management will drive the company to continue to grow.
valuations
Under current share capital, considering that there is still uncertainty about the recovery of domestic demand, we lowered EPS in 2025. We expect EPS from 2024 to 2026 to be 0.57/0.64/0.73 yuan, respectively, and the corresponding PE will be 11/9/8 times, respectively, maintaining the purchase rating.
The main risks faced by ratings
Retail fell short of expectations, store expansion fell short of expectations, and industry competition intensified.