Key points of investment
The company released its 2024 quarterly report. The year-on-year ratio of revenue/net profit attributable to mother/net profit after deduction of non-return to mother for the first quarter of 2024
The growth rate of net profit deducted from non-net profit was faster than revenue, and net profit attributable to mother was affected by the reduction in government subsidies, 24Q1 achieved deducted non-net profit of 235 million yuan, +6.93% year-on-year, faster than revenue growth, and the profitability of the main business increased steadily; 24Q1 achieved net profit of 250 million yuan, or -2.09% year-on-year. The growth rate of net profit attributable to mother was slower than net profit not deducted, mainly due to other income falling from 47.71 million to 19.3 million in 23Q1, a decrease of 28.4 million, mainly due to a decrease in government subsidies received by the company during the reporting period compared to the same period.
Fluctuations in operating cash flow are related to payment of bonuses and taxes
As of the end of the 2024Q1 period, the company's inventory was 1,069 million yuan, down 0.61% from the end of the 2023 Q1 period; accounts receivable were 703 million, up 3.13% year on year, and the operating turnover index was stable. Net operating cash flow was 17.52 million, -88.29% year-on-year. The fluctuation was mainly due to the year-on-year increase in the company's main business revenue and an increase in sales repayments during the reporting period, but payments for product purchases, employee bonuses for the previous year, taxes, etc. increased compared to the same period last year.
Channel expansion has been smooth in 23 years, discounts have continued to narrow, and the multi-brand matrix has been improving. Looking at the full year, HAZZYS opened 40 net stores throughout the year, 457 stores at the end of the period (including 313/104 direct-operated/franchised stores), and 13 newsday birds opened at the end of the period. The number of stores reached 817 (including 232/585 direct-operated/franchised stores), and channel expansion was smooth.
By brand, HAZZYS/Treasure Bird's revenue increased 17.18%/24.12%/15.87% year-on-year to 1,730 million/1,758 million/1,039 million, and the three major brands all surpassed 1 billion in revenue. In addition, Chemiche & TB and Lefeiye also showed strong growth momentum. The annual revenue of Chemiche & TB increased by 30.06% to 179 million, and Lefeiye's revenue increased by 40.50% to 262 million. From a profit perspective, the company's gross margin of online sales/direct sales/franchise/group purchase sales was +1.76pp/+1.77pp/-0.59pp/+0.56pp to 69.53%/77.23%/66.67%/46.40% year-on-year. The outstanding performance of multi-channel profitability improvement mainly comes from product innovation and upgrades and strict terminal discount control.
Profit Forecast and Valuation:
Despite interference from external factors in the past few years, the company has shown a clear upward trend; we believe that the company's rich heritage in brand power, channel resources, and supply chain resources is worth looking forward to. We expect the company to achieve net profit of 8.2/9.5/1.08 billion in 24/25/26, with a growth rate of 18.08%/15.25%/13.86%, corresponding to the current market capitalization PE of 10X/9X/8X. As a target of high growth and undervaluation, the company maintains a “buy” rating.
Risk warning: decline in terminal consumption power; changes in consumer demand;