The company released its 2024 quarterly report: The company achieved revenue of 296 million yuan (-4.5% YoY), net profit to mother of 0.25 million yuan (-32.9% YoY), and net profit excluding non-return to mother of 123 million yuan (-35.1% YoY). The company's Q1 revenue and profit were slightly pressured, mainly due to the high 2023Q1 base. After excluding Douyin's local lifestyle business, the company's overall revenue remained steady. Through refined operation, the company optimizes group purchase products, and constructs a new situation of online and offline joint development.

Douyin's local lifestyle business declined, and offline business remained stable. 2024Q1's various local lifestyle service platforms achieved cumulative store write-off revenue of 37.9531 million yuan, or -25.3% year over year. Of these, Douyin's local lifestyle platform revenue was 14.3965 million yuan, or -54.6% year over year, while the remaining local lifestyle platforms earned 235.566 million yuan, or +23.6% year over year. Excluding Douyin's local lifestyle business, the company's total revenue reached 282 million yuan, +1.26% over the same period last year. The company launched Douyin Local Life in 2023Q1 to achieve a “good start”. Product sales have grown rapidly. Currently, the growth rate has declined, but as the company continues to improve the layout of the local lifestyle service platform, it is expected that the local lifestyle business will stabilize in the future.

Improve the digital retail system, and the franchise is progressing steadily. In 2023, the company established a new “Data Operation Department” and a “User Operation Department” to further explore and analyze effective data, optimize the pre-sales and after-sales service management model, and promote product structure upgrades. In 2023, the company's functional lens sales were steady and steady (+43.1% YoY), and its own brand lens sales accounted for 65.8% (+6.0% YoY). In addition, there are a total of 9134 users who have completed the registration process on the Concrete Glasses Alliance platform (Original Mirror Link Tesco platform), and a total of 598 franchise store users who have completed the franchise signing process. The expansion of the sinking business has progressed steadily through joining.

Gross profit performance has been steady, and rates have risen. 2024Q1's gross margin was 58.96% (YoY -0.5pct), and net profit margin was 8.5% (YoY -3.6pct). In terms of cost performance, the Q1 sales/management/ R&D expenses ratio was 39.7%/7.2%/0.4%, respectively (+3.3pct/+0.3pct/+0.4pct compared to the same period). The cost rate has increased, mainly due to increased drainage efforts to increase consumer loyalty and recognition.

Profit prediction and investment rating: The company is deeply involved in the eyewear circuit, and functional products continue to be released. In the future, with the improvement of the company's local lifestyle business layout and the integrated development of online+offline, performance is expected to continue to improve.

We expect the company's net profit to be 150 million yuan, 180 million yuan, and 210 million yuan respectively in 2024-2026, with corresponding PE being 17.9X, 14.9X, and 12.9X respectively, maintaining the “buy” rating.

Risk warning: The risk of macroeconomic environment fluctuations, increased industry competition, and franchise expansion falls short of expectations.