Profitability improved, 24Q1 performance was impressive. In 2023, the company issued performance announcements. In 2023, the company achieved revenue of 1,275 billion yuan, +42.30% year over year, and net profit loss to mother of 508.654 million yuan, a year-on-year reduction of 59.12%, in line with previous performance forecasts. The 24Q1 company achieved revenue and net profit of 293 million yuan/156.01 million yuan respectively, +28.59%/+956.01% year-on-year, respectively, with impressive results. We maintained the company's 24-25 EPS at 1.28 yuan and 1.70 yuan, respectively, and introduced a 26-year EPS forecast value of 2.31 yuan. Comparable to the company's 2024 Wind unanimously expected the average PE value to be 19x. Although the company did not achieve profit in 23 due to cost investment, and the company's sales expenses were high, we believe that in the long run, the company's flagship items and multi-channel layout brought performance flexibility, so the company was given 28xPE in 2024, corresponding to a target price of 35.84 yuan (previous value:
32 yuan), maintaining the “gain” rating.
The company's recovery trend continues, with scalp+head/shoulder/lower back products clearly driving the company's revenue +42.30% year-on-year in 2013, which is a significant increase. By product, the company's scalp+head/shoulder/lower back product revenue increased significantly in 2023, with +49.30%/+438.85%/+30.95%, respectively, accounting for 12.98%/37.85%/8.54% of revenue, respectively. By region, the company's domestic/overseas revenue in '23 was +46.98%/-6.61%, respectively. The main reason was the increase in sales of explosives in domestic online and offline physical stores. At the same time, the company adjusted its overseas sales strategy to reduce the share of ODM products sold to overseas customers. The 24Q1 company's revenue was +28.59% year over year, continuing the high growth rate since 23Q2 (23Q2/23Q3/23Q4 company revenue +76.08%/+79.81%/+34.93%, respectively), and the company's business recovery momentum continues.
Profit improved significantly year on year 23/24Q1, and profitability increased markedly. The gross margin of the 23/24Q1 company was 59.32%/62.78%, respectively, +9.50/+3.73 pct. On the cost side, since 2023 is the company's brand building strategy year, the relevant channel expenses were heavily invested. The company's sales expenses were +42.56% year over year, and the sales expense ratio was +0.10pct year over year; due to exchange gains and losses, the financial expenses rate increased by +5553.77% year over year, and the financial expense ratio was +0.28pct year on year; although management/R&D expenses were -0.68/ -1.81 pct year on year, respectively, management/R&D expenses were +22.60%/+2.06% year over year.
Although the company did not achieve profit in '23, it drastically reduced losses; the company's net interest rate in 24Q1 was 5.32%, which was positive compared to 23Q1, and +6.12pct year on year.
Deepen the multi-channel layout and achieve high growth in the Douyin channel
With increasing strategic investment in the Douyin channel, the company initially formed a strategy to drive “big single products” by directing traffic from the Douyin channel to other e-commerce platforms and offline direct-run stores. Dividing revenue by channel, the company's online direct sales revenue was +67.50% year-on-year in '23, mainly due to sales growth on the Douyin platform; offline distribution revenue was +68.74% YoY, mainly due to growth brought about by duty-free channels, franchise business, and the addition of Sam's channel.
Risk warning: increased market competition; risk of high inflation overseas; risk of new products falling short of expectations.