Core views
In 2023, the company's revenue was 1,391 million yuan/ +22.1%; net profit attributable to mother was 71.8 million yuan/ +2.7%; net profit after deducting non-return to mother was 55.4 million yuan (-1.07 million yuan in '22). 24Q1's revenue was 382 million yuan/ +57.7%; net profit to mother was 71.18 million yuan/ +286.6%; net profit after deducting non-return to mother was 66.89 million yuan/ +417.9%; the high increase in revenue and profit was mainly due to the combined impact of the chip business and the increase in revenue and profit from the outdoor business. The company's outdoor business channel structure was optimized in '23, and the main brand drove growth. Joint channel revenue was 275 million yuan/ +144.5%, and Pathfinder's main brand revenue was 1,152 million yuan/ +21.2% in '23. The chip business had revenue of 133 million yuan/ +1484% in '23, mainly contributed by G2 Touch, with consolidated revenue of 122 million yuan and net profit of 29.46 million yuan in '23.
occurrences
The company released its 2024 quarterly report. The company's revenue for the first quarter of 2024 was 382 million yuan/ +57.7%; net profit of 71.18 million yuan/ +286.6%; net profit after deduction of 66.89 million yuan/ +417.9%; net operating cash flow - 63.53 million yuan/ -469.8% (mainly due to an increase in 24Q1 purchase payments, payment of various taxes, etc., while 23Q1 received a high repayment base from major customers in previous years). The basic EPS was 0.0818 yuan/share, +293.3% year-on-year; the weighted average ROE was 3.38% /+2.50pct.
The company released its 2023 annual report. In 2023, the company's revenue was 1,391 million yuan/ +22.1%; net profit attributable to mother was 71.8 million yuan/ +2.7%; net profit after deduction of non-return to mother - 55.4 million yuan (-12.1 million yuan in '22); non-recurring profit and loss of 127 million yuan (82 million yuan in '22). The year-on-year increase was mainly due to increased income from changes in fair value and impairment reversals of receivables. Net operating cash flow of 409 million yuan/ +101.9%. The basic EPS was 0.0818 yuan/share, +3.3% YoY; the weighted average ROE was 3.41% /+0.10pct. The company plans to distribute a cash dividend of RMB 0.24 (tax included) to all shareholders for every 10 shares, with a cash dividend ratio of 28.2%.
Looking at a single quarter, the 23Q4 company's revenue was 460 million yuan/ +17.8%; net profit attributable to mother was 25.71 million yuan/ -56.1%; net profit after deducting non-return to mother - 90.19 million yuan (22Q4 was 11.19 million yuan).
Brief review
The 24Q1 revenue performance exceeded expectations, and the 23-year results were mainly dragged down by Beijing Xinneng. The 24Q1 company's revenue was 382 million yuan/ +57.7%, and net profit was 71.18 million yuan/ +286.6%. The high increase in revenue and profit was mainly due to the combined impact of the chip business and the increase in revenue and profit from the outdoor business. In '23, the company's revenue was 1,391 billion yuan/ +22.1%, and net profit to mother was 71.8 million yuan/ +2.7%. The low profit growth rate was mainly due to Beijing Xinneng still in the cultivation period, which dragged down the report.
The outdoor business channel structure is optimized, and the main brand drives growth. The outdoor business revenue in '23 was 1,257 billion yuan/ +11.2%, and the gross profit margin was 48.6%/-2.9pct.
1) Looking at split channels, online channel revenue is 345 million yuan/ +7.2%, gross profit margin 55.8% /+3.6pct, online actively adjusts strategies to grasp live e-commerce trends; affiliate channel revenue is 286 million yuan/ -22.6%, gross profit margin 38.6%/-3.1 pct; joint channel revenue is 275 million yuan/ +144.5%, gross profit margin 40.9%/-7.9pct; direct channel revenue is 171 million yuan/ -6.1%, gross profit margin 66.9% /-1.2pct. The company's offline channels insisted on intensive cultivation, driving channel sinking, and the transformation of direct management and franchise into joint venture channel revenue. By the end of '23, there were 832 franchised stores (including joint venture) stores, 61 or -84 direct-run stores, the average pickup amount of direct stores was 2.81 million/ +123.2%, and the average store efficiency of mature direct-run stores over 12 months of age was 2.85 million yuan/ +97.0%. 2) Looking at the split brands, the main brand of Pathfinder earned 1,152 billion yuan/ +21.2% in 23 years, and the TOREADKIDS children's clothing brand earned 71.05 million yuan/ +8.8%, Toread. X brand revenue is 10.58 million yuan/ -16.1%, and Discovery Expedition's revenue is 17.76 million yuan/ -79.3% due to changes in cooperation agreements, and the impact is weakening.
Pioneering the second major chip business, G2 Touch is developing well, and Beijing Xineng is still in the cultivation period. The chip business had 23-year revenue of 133 million yuan/ +1484%, and gross profit margin of 44.4% /-31.2pct. The company's chip business uses G2Touch, Beijing Xineng, and Jiangsu Dingmao Semiconductor Co., Ltd. as carriers. Among them: 1) G2Touch focuses on touch chip design and development. Since June 1, '23, the company has held 95.01% of the shares, consolidated revenue of 122 million yuan, and net profit of 29.46 million yuan. 2) Beijing Xinneng focuses on Mini/Micro LED display driver IC design, development and module production. The company holds 60% of the shares and has a revenue of 1.08 million yuan over 23 years. The business is still in the cultivation period, and net profit is under pressure. 3) Jiangsu Dingmao focuses on providing customers with chip packaging and testing services. Since July 1, '23, the company has held 60% of the shares, consolidated revenue of 1.05 million yuan in '23, and net profit of 970,000 yuan.
Direct management switched to joint ventures, and sales expenses decreased, driving up profitability: in 2023, the company's gross margin was 48.23% /-3.47pct, net margin was 3.08% /-1.64pct, 24Q1 gross profit margin was 47.54% /-1.32pct, and net interest rate was 17.53% /+12.13pct. On the expense side, the company's sales, management, R&D, and finance expenses in '23 were 23.67% /-4.60pct (decrease in direct to joint sales expenses), 13.00% /+2.19pct (due to increased employee remuneration, mergers and acquisition-related expenses, and intangible asset amortization), 4.79% /-0.38pct, -0.49% /+0.10pct; 24Q1 The company's sales, management, R&D, and finance expenses rates were 17.54% /-11.17pct, 10.56% /-3.073.24%, respectively/ -1.13pct, -3.21%/-1.59pct (increase in subsidiary exchange earnings). The company's outdoor product inventory balance in '23 was -15.13%, and the number of inventory turnover days was 243 days/+6 days.
Profit forecast: We expect the company's revenue for 2024-2026 to be 17.1, 20.1, and 2.33 billion yuan, respectively, up 23.5%, 17.7%, and 15.8%; net profit to mother will be 1.89, 2.22, and 263 million yuan, respectively, up 162.8%, 17.6%, and 18.4% year on year; corresponding P/E will be 26.8, 22.8x, and 19.3x, covered for the first time, giving a “gain” rating.
Risk warning: 1) Risk of inventory price decline: The optimal management of outdoor goods inventory is a key issue that the company has been paying attention to in recent years. Although the company has taken measures to continuously optimize the sales and storage structure, it is still necessary to reserve some inventory for normal operation. If inventory backlogs and depreciation occur in future business years due to changes in the market environment and increased competition, it will adversely affect the company's operations. Based on 23 financial data, assuming that the company's inventory impairment losses increase by 10%, 20%, and 30%, it will cause the company's net profit to decline by 17%, 34%, and 51%. 2) Technology upgrade, iteration and innovation risk: The chip business is a high-tech industry. The upgrade speed is rapid. The company must accurately predict the technical development direction and market trends of related chips, and invest in R&D, including upgrading existing technology, based on predictions. If the company cannot accurately grasp the relevant chip technology and market development trends in the future, the progress and results of the technology upgrade iteration do not meet expectations, or the new technology cannot be industrialized, it will affect the competitiveness of the company's products and miss market development opportunities, which will adversely affect the company's continued competitiveness and future business development.