Driven by direct sales channels, revenue increased 22.6% in 2023, and net profit to mother increased 25.2%. Bienleven is a menswear brand that specializes in high-end sports lifestyle. Revenue in 2023 increased 22.6% to 3.54 billion yuan, and net profit to mother increased 25.2% to RMB 90.1 billion. By channel, direct/franchise/online revenue changed +35%/-2%/+16% year over year, respectively. The decline in franchise channels is expected to be mainly due to the high franchise revenue base in 2022 and the reduction in orders due to franchisee handling of inventory during the 2022 pandemic. Due to the increase in the share of direct management and the increase in gross margin of direct management and e-commerce, the company's gross margin increased 1.2 percentage points to 78.6%. Due to the increase in the share of direct management, the company's expense ratio increased by 1.8 percentage points. At the same time, the asset impairment loss ratio decreased by 1.7 percentage points, the ratio of other returns increased by 0.4 percentage points, and the net return on investment decreased by 0.8 percentage points. As a result, the net interest rate to mother increased 0.6 percentage points to 25.8%. Net cash flow from operating activities increased by 37.5% to $1.3 billion in 2023, with a net present ratio of 1.4 billion yuan.
Net profit to mother increased 20% in the first quarter of 2024, and inventory turnover improved significantly. Revenue for the first quarter increased 17.6% to 1.27 billion yuan, net profit to mother increased 20.4% to 360 million yuan, gross margin increased slightly, expenses increased, asset impairment ratio decreased, and net interest rate to mother increased 0.7 percentage points to 28.5%.
Inventory has improved significantly, and net sales have been maintained. At the end of 2023, the number of inventory turnover days decreased by 42 days to 346 days year on year, inventory age increased 8.1 percentage points to 87.2% within 2 years, and the number of inventory turnover days in the first quarter of 2024 decreased by 40 days to 200 days year on year, and inventory health improved markedly. In 2023, the company maintained net store openings, with a net increase of 28 and 36 direct sales and franchises, respectively, to 607 and 648.
Risk warning: repeated epidemics, sharp decline in inventory value, damage to brand image, and systemic market risks.
Investment advice: Both financial and operational quality have improved, and medium- to long-term growth can be expected. On a high basis in the first quarter, the company's net profit to mother still achieved a 20% increase, inventory health improved, and performance was better than that of peers.
Looking at the medium to long term, Biyin Levin accurately positioned the high-end sports fashion industry segment circuit, and cultivated high-end brand genes through high-quality marketing and excellent product strength. As brand influence increases, there is plenty of room for future growth. Due to the continued weak recovery of the consumer industry in 2024, and the company's actual net store opening volume in the second half of 2023 was lower than the original forecast, the estimated net profit for 2024-2026 was 11.3/13.4/1.57 billion yuan (originally $1,17/1.40 billion yuan in 2024-2025), up 23.8%/18.9%/17.0% year-on-year. Due to the reduction in profit forecasts and the slowdown in store opening growth, the target price was lowered to 37.5-39.5 yuan (originally 41.0-43.1 yuan), corresponding 2024 19-20x PE, maintaining a “buy” rating.