Incidents:
On April 18, Lego Co., Ltd. released its 2023 annual report: in 2023, the company achieved operating income of 3.90 billion yuan/year on year +21.6%, net profit after deducting 630 million/year on year, net profit of 250 million/year on year +142.4%, of which 2023Q4 achieved operating income of 1.22 billion yuan/year on year +35.7%, net profit due to mother 120 million/year on year +93.6%.
Key points of investment:
Traditional business: New categories contribute new growth points, and independent stations have performed well.
1) In 2023, the revenue of linear drive products was 2.04 billion yuan/+10.5%, accounting for 69.8% of main revenue (excluding overseas warehouses). While maintaining the advantages of the lift table category, the company relied on core linear drive technology to collaborate with brands and channel advantages to develop new categories of revenue such as electric sofas and ergonomic chairs.
2) In 2023, the company's cross-border e-commerce sales revenue was 1.77 billion yuan/year over year, and independent website sales revenue was 670 million yuan/year on year +16.7%. The company's independent website sales increased to nearly 40% of cross-border e-commerce sales revenue, and US independent website traffic surpassed that of major competitors for the first time.
Overseas warehouse business: Continuing the high growth trend, the scale effect is showing. In 2023, the company's public overseas warehouse business developed rapidly, achieving revenue of 950 million yuan/year over year, increasing its share of revenue to 24.4%, and a gross profit margin of 12.7% /year on year +9.3 pct. Through the orderly expansion of the company's warehouses and improvements in storage capacity utilization and turnover, the number of shipments increased significantly year-on-year, the ability to bargain at last-end discounts increased, and profitability continued to improve. 2024Q1 has accelerated its expansion. Currently, it has 13 self-operated overseas warehouses around the world, with a total area of 362,400 square meters, and has served more than 600 foreign trade enterprises.
The level of gross margin has increased, and cost control is stable. The company's gross profit margin in 2023 was 36.5%/+2.1 pct year on year, and the 2023 sales/management/ financial/ R&D expenses ratio was 20.1%/4.2%/1.0%/3.7%, -0.1 /+0.1/-0.8 pct, respectively.
Profit forecast and investment rating: The company's ergonomic product business has developed steadily, and its own brand advantage has been established. As the online penetration rate of large overseas furniture increases, demand for overseas warehouses continues to expand. The company's overseas warehouse business has three core competitive advantages in price, timeliness and service, and has sufficient momentum for medium- to long-term growth. We expect the company's 2024-2026 revenue to be 48.92/60.02/6.952 billion yuan, net profit to mother of 408/5.05/584 million yuan, and the corresponding PE valuation is 14/12/11 x. Covered for the first time, a “gain” rating was given.
Risk warning: Overseas warehouse construction progress falls short of expectations, increased competition in overseas warehouse markets, international trade conflicts, fluctuating shipping rates, and increased competition for ergonomic products.