The 2023 results fell short of our expectations. 1Q24 results were in line with our expectations, and Beijiajie announced the 2023 and 1Q24 results: 2023 revenue of 1,067 million yuan, +1.6% year over year, net profit to mother of 0.93 million yuan, -4.9% year on year. The performance was lower than our expectations, mainly due to participation in Vimezi's long-term equity investment depreciated by 50 million yuan; 1Q24 revenue was 286 million yuan, +28.3% year over year. The results were in line with our expectations.
Development trends
1. The steady increase in toothbrushes contributed to the basic revenue market, and the growth rate of dental floss and dental floss sticks was impressive. The company's revenue in 2023 was +1.6% YoY to $1,067 million. By product, ① toothbrushes: 2023 revenue increased steadily by 6.2% to 463 million yuan, accounting for 43% of total revenue; ② Other oral care products: 2023 revenue +11.0% to 259 million yuan. Among them, we expect revenue growth of dental floss sticks and dental floss sticks to be the third largest single product with revenue exceeding 100 million yuan other than toothbrushes and wipes; ③ wet wipes: 2023 revenue is -9.9% to 336 million yuan, mainly due to a decline in demand for disinfectant wipes. We expect other wet wipes to increase year-on-year revenue after excluding disinfectant wipes Over 10% 1Q24's revenue was +28% year over year. Among them, toothbrush/other oral care products/wipes business revenue increased 15.8%/40.4%/37.9% year over year, which was a significant improvement over the previous month.
2. Net interest rates in 2023 were dragged down by depreciation, and 1Q24 net interest rates improved markedly year-on-year. In 2023, the company's gross margin was -0.8ppt to 23.2% year over year, mainly due to lower revenue for disinfectant wipes with high gross margin; 1Q24 gross margin was +3.7ppt to 25.4% year over year, mainly due to high revenue growth driving scale effects, and the year-on-year decrease in the price of some raw materials such as wire brushes. The company's expense ratio for the 2023 period was -2.1ppt to 15.4% year-on-year, of which the sales expense ratio was -3.0ppt to 7.0% year-on-year, mainly because the company controlled the marketing expenses of its own brand.
In addition, the income from the change in fair value was 53 million yuan, mainly due to the company's participation in Vimezi's 15.7745% shares converted from financial instruments to long-term equity investment accounting; asset impairment losses amounted to 53 million yuan, mainly due to the company's impairment of long-term equity investment of 50 million yuan. Under the combined influence, the company's net profit margin in 2023 was -0.6ppt to 8.7% year-on-year. 1Q24 net margin was 6.6%, +3.4ppt year over year.
3. Optimistic about the company's growth space under endogenous and extrinsic collaborative development. Looking ahead, ① Dental Care: In terms of OEM business, the company is based on the dominant category of toothbrushes and continuously improving the product layout such as dental floss sticks, dental floss, toothpaste, etc.; in terms of its own brands, according to Jiuqian and Feigua data, the 1Q24 Beijiajie brand grew rapidly by 39% year-on-year in Douyin, JD+ Tmall GMV. ② Wipes: The company's wet wipes category includes baby wipes, makeup remover wipes, etc., and the product range is rich, and we expect to contribute to steady growth. In addition, the company acquired some of the shares of Vimezi and Shennkang to gradually expand its business layout in the field of health. We are optimistic that the company will achieve sustainable growth through endogenous extension.
Profit forecasting and valuation
Due to additional partial amortization due to the company's acquisition of Vimezi shares, we lowered our 2024/2025 net profit by 12% and 12% to 1.45 and 177 million yuan. The current stock price corresponds to 16 times/13 times the 2024/2025 price-earnings ratio. Maintaining an outperforming industry rating, but due to adjustments in profit forecasts, we lowered our target price by 11% to 29.5 yuan, which corresponds to 20 times/17 times the 2024/2025 price-earnings ratio, with 28% upside compared to the current stock price.
risks
Competition in the industry intensifies, there is a risk of fluctuations in raw material prices, and the performance of independent brands and new products falls short of expectations.