Event: The company released its 2024 quarterly report. In the first quarter of 2024, the company achieved operating income of 159 million yuan, a year-on-year decrease of 6.52%; realized net profit to mother of 0.23 million yuan, an increase of 28.25% over the previous year; realized net profit without deduction of 121 million yuan, an increase of 29.04% over the previous year.
OEM/ODM revenue increased significantly. 1) By business, OEM/ODM revenue has increased rapidly, and the own-brand business is under pressure. 2024Q1's own brands/OEM&ODM achieved revenue of 122/38 million yuan respectively, -14.37%/+32.51% YoY. 2) Looking at domestic and foreign sales, 2024Q1 achieved domestic/overseas revenue of 1.10/12 million yuan, -17.30%/+28.23% year-on-year. The transformation of direct sales from overseas companies to contribute to revenue through distribution began to show. In addition, the Douyin channel achieved revenue of 34 million yuan in online direct sales of its own brands in 2023, an increase of 32.28% over the previous year. (The per capita consumption of the company's Douyin channel in 2023 was 836 yuan, and the per capita consumption of Tmall, Beiding Mall, and Jingdong was 704/546/578 yuan respectively, with Douyin clearly leading the per capita consumption).
Cost control has been effective, and profitability has improved. 1) Gross profit margin: 2024Q1's gross margin fell 2.02 pct to 49.68% year on year, mainly due to changes in raw material costs. 2) Rate side: 2024Q1 sales/management/R&D/finance rate is 23.59%/10.23%/6.06%/-1.00%, year-on-year change -3.3pct/-0.01pct/-0.54pct/-1.18pct, with strong cost management capabilities. Among them, the sales expense ratio dropped significantly, due to the company actively improving the efficiency of cost investment. 3) Operating cash flow: The company's net operating cash flow in 2024Q1 was -102 million yuan, -104.77% year over year. The large decline in cash flow was mainly due to the increase in the share of OEM/ODM and independent brands through distribution models and the increase in account periods. 4) Net interest rate: Overall, benefiting from factors such as improved cost efficiency, the company's 2024Q1 net interest rate increased by 3.84pct year-on-year to 14.18%.
Promote the construction of offline experience stores, and continue to improve the brand image. As offline consumption gradually picked up, the company continued to lay out offline experience stores to enhance its brand image. In 2023, the company's offline direct store revenue increased by 27.16%, and the number of stores increased net by 4 (9 new stores were added and 5 stores were closed).
Profit forecasting and investment advice. We expect net profit attributable to mother for 2024-2026 to be 1.01/1.16/129 million yuan, respectively, up 42.1%/14.9%/10.4%, maintaining the “buy” rating.
Risk warning: Risk of raw material price fluctuations, new product sales falling short of expectations, channel expansion falling short of expectations.