Introduction to this report:
All three businesses achieved rapid growth in 2023, and the company's net profit to mother increased 953% year over year; in 2024, the company will continue to promote endogenous and epitaxial expansion, and performance flexibility is expected to continue to unleash.
Key points of investment:
The investment proposal maintains the 2024-2025 EPS forecast of 0.71/0.91 yuan, and adds the 2026 EPS forecast of 1.12 yuan. Considering the company's excellent performance flexibility, the company will be given PE 30 times higher than the industry average in 2024, maintain the target price of 21.6 yuan, and maintain the “gain” rating.
Incident: 2023 revenue/net profit to mothers/net profit deducted to mother were $51.5/23/20 billion, respectively, +24.4%/+953%/+16846%; of these, 2023Q4 revenue/net profit/deducted non-return to mother ratio was 14.5/0.3/0.2 billion yuan, +30.8%/+551%/+211% YoY. The performance was in line with expectations.
The three major businesses are growing rapidly, and the quality of operations has been steadily improving. Revenue in 2023 increased by 24%, and gross margin stabilized at 57%. Among them, revenue from the womenswear/baby/medical and aesthetic business was 19.8/9.8/2.13 billion yuan respectively, +29.3%/+11.1%/+27.8% year-on-year, and gross margin was -2.8/+0.2/+3.3pct year-on-year. In the women's clothing business, online/self-operated/distribution revenue was +45%/+31%/-34% YoY, with the number of own/dealership stores +39/ -71 (+10%/-40% YoY), and same-store revenue grew rapidly. In terms of infant business, online/self-operated/distribution revenue was -6%/+16%/+5% year-on-year, and own/dealership stores were +18/-16 (+5%/-10%) year-on-year. In terms of medical and aesthetic business, Milan Baiyu/ Crystal Skin Aesthetic/ Gao Shengsheng/ Han Chen Medical Aesthetic/ Wuhan Wuzhou earned +29%/+38%/+13%/+25%/+21%, respectively. Among them, Wuhan Wuzhou and Wuhan Han Chen were acquired in 2023 and achieved performance promises. By the end of 2023, the number of medical and aesthetic institutions reached 38, a net increase of 8 over the same period last year. Expense rate control was good in 2023, and the net interest rate was +4pct year-on-year.
Endogenous and epitaxial expansion continues, and performance flexibility is expected to continue to unleash. On the one hand, the company will keep abreast of domestic consumer trends, promote the upgrading of women's clothing brands, and continue to increase its influence in the field of mid-to-high-end maternal and child consumption around the Edova brand. It is expected that the women's clothing and baby business will maintain steady development in 2024; on the other hand, the company will continue to promote epitaxial mergers and acquisitions and endogenous growth in medical and aesthetic institutions. As new institutions and sub-new institutions gradually climb, performance flexibility is expected to continue to unleash.
Risk factors: The expansion of stores fell short of expectations, and the profits of new medical and aesthetic institutions fell short of expectations