Key points of investment:
The company released its 2023 annual report and 2024 quarterly report. The 23-year results were slightly lower than expected, and the 24Q1 results were in line with expectations.
1) Revenue increased in 23 years, pressure on the OEM business, and increased cost ratios led to a decline in profits. Revenue in '23 was 1.46 billion yuan, up 1.4% year on year. Net profit due to mother was 110 million yuan, down 24.1% year on year, after deducting non-net profit of 100 million yuan, down 25.0% year on year. The domestic camping industry has returned to a healthy pace of development, and the OEM business is affected by downstream inventory removal. 2) 23Q4 was dragged down by the OEM business, and the profit side declined significantly. 23Q4 revenue was $30 billion, up 8.2% year-on-year, and net profit attributable to mother was a loss of $03 billion (profit of $0.1 billion in 22Q4). 3) Revenue growth resumed in 24Q1, and profit side flexibility was higher. 24Q1 revenue was 360 million yuan, up 3.7% year on year, and net profit to mother was 0.3 billion yuan, up 9.3% year on year. The recovery in the export OEM business led to a recovery in performance. 4) Release the 2023 profit distribution plan: It is proposed to distribute a cash dividend of 1.2 yuan (tax included) per share, with a cash dividend ratio of 75%. At the same time, it is proposed to increase the share capital by 0.4 shares per share using capital reserves.
The independent brand business achieved channel expansion, and the OEM business rebounded at the bottom. 1) The independent brand business is developing healthily, and the development trend of Damu's offline and Komaki franchise channels is good. In '23, revenue from the own-brand business was 930 million yuan, up 31% year on year. Looking at the spin-off of the independent brand business, revenue for Omaki Camping Equipment/Komaki Outdoor Clothing increased 33%/17% year over year respectively; further spin-off channels, the revenue from the Damaki Online/Omaki Direct Management/ Komaki franchise increased 3.5%/62.9%/decreased 11.1%/27.9% year on year, respectively. In 24Q1, the overall domestic sales environment was weak. Independent brand business revenue was 140 million yuan, down 8.6% year on year. By channel, Damaku Online/Omaki Direct Management/Komaki Franchise Revenue fell 20.8%/2.3%/fell 11.6%/10.7% year-on-year respectively. 2) The 24Q1 foundry business has clearly picked up, and the momentum is improving.
In '23, OEM business revenue was 530 million yuan, down 26% year on year, which was greatly affected by downstream customers removing inventory. In 24Q1, foundry business revenue was 215 million yuan, up 14.0% year on year, with obvious signs of recovery at the bottom.
Gross margin has been rising steadily, and short-term cost ratios have increased due to strong brand business and management team upgrades. The gross profit margin in '23 was 28.3%, the same year on year. The sales expense ratio increased 1.8 pct to 8.6% year over year due to the expansion of the scale of independent brands and increased marketing investment, the management fee ratio increased 0.6 pct to 6.6% due to the upgrade of the core management team and system upgrade, and the net margin decreased 2.5 pct to 7.3% year over year. The gross margin of 24Q1 increased 1.2 pct to 27.7% year on year, mainly due to the increase in gross margin of the foundry business. Sales/management expenses ratio decreased by 1.7 pct and increased by 2.1 pct year on year, respectively, and the final net margin increased 0.4 pct to 8.9% year on year.
Mu Gaodi is deeply involved in the outdoor industry. The independent brand business is developing healthily, and the OEM business has steadily rebounded, maintaining an “gain” rating.
The penetration rate of the domestic outdoor industry has increased, and the company has expanded its own outdoor brand business with leading brands, products and channel capabilities. Since the brand business is in an expansion period, the 24-25 sales expense ratio was raised to 9.0%/8.5% (originally 7.3%/7.0%), and the 24-year profit forecast was lowered. The net profit forecast for 24-26 was 1.3/1.7/210 million yuan (the original 24-25 year was 17/20 million yuan), corresponding PE was 17/13/10 times, giving the company a 24-year PE valuation (comparable to the company's 24-year average PE) to maintain the “increase” rating.
Risk warning: The increase in industry penetration falls short of expectations; industry competition intensifies; and sluggish overseas demand is dragging down the growth rate of the OEM business.