On April 26, the company announced 4Q23 revenue of 689 million yuan, +17.2% year on year, net profit of 85.59 million yuan, +58% year over year, after deducting non-net profit of 30.76 million yuan, -34% year over year. The profit side was lower than previous performance guidelines, mainly due to Double Eleven's performance falling short of expectations. A cash dividend of 0.52 yuan per share will be distributed in '23, with a dividend ratio of 80.38%, and plans to increase the mid-term dividend in '24. 1Q24 revenue/net profit to mothers/net profit after deducting non-net profit of 6.6/1.1/104 million yuan, +38.7%/+40.6%/+40.8% year-on-year, all exceeded expectations.
The Koihuo and Douyin channels are growing at a beautiful rate. By brand, Koihuo's revenue in '23 was 643 million yuan, up 125% from the same period, accounting for 28.9% of the main business. The main brand, Marumi, earned 1.56 billion yuan, +11.63% year-on-year. By channel, the outstanding performance of live streaming channels boosted online revenue by +50.4% (including Tmall and Douyin +35.6%/+106.3%), while offline pressure was still under pressure, -27.17%, accounting for 15.9%.
1Q24 operations improved markedly, and while revenue increased rapidly, profit margins exceeded expectations. 1Q24 product structure continued optimization & strengthened cost control, gross profit margin 74.6%, year-on-year +5.9PCT, month-on-month +4.2PCT; firm online transformation and continuous investment, sales expenses ratio 50.3%, +7.8PCT year over year, a significant decline from 59.1%/58.5% in Q3/Q4 last year; management fee ratio -1.2PCT to 3.1% year on year; deducted non-net interest rate +0.2 PCT to 15.8% year on year, +11.3 PCT month on month.
Looking ahead to 24 years, the main brand's online operations will accelerate refinement. The product side will adhere to segmented products, promote the main series offline, and focus on the strategy of large single products online to restructure the collagen circuit; Love Fire continues to strengthen the advantages of base makeup + IP co-branding, focusing on unbreakable series+ invisible series product upgrades & new segmented products, hoping to continue to grow rapidly.
The company has a solid foundation (long-term distribution+supply chain+R&D+product capabilities), continuous improvement in online operation capabilities & implementation of a smart single product strategy, gradual streamlining of channels, products & organizations, and sufficient upward momentum.
Considering the costs required for the online transformation phase, the profit forecast for 24/25 was slightly lowered. The net profit for 24-26 is estimated to be 3.52 (previous value 3.97) /4.58 (previous value 5.11) /582 million yuan, +36%/+30%/+27% year-on-year, corresponding PE is 32/25/19 times, respectively, maintaining the “buy” rating.
Main brand growth falls short of expectations, marketing efficiency falls short of expectations due to intense online competition, and offline recovery falls short of expectations