Incident: The company released its 23 annual report and 2014 quarterly report. In 23, it achieved revenue of 11.168 billion yuan, a year-on-year decrease of 8.0%, achieved comprehensive comprehensive income of 1,566 billion yuan, a year-on-year decrease of 37.2%, and achieved overall revenue of 310 million yuan in the first quarter of '24, an increase of 5.6% over the previous year.

The domestic market dragged down business for corporate customers, and overseas markets grew steadily: sales revenue to corporate customers fell 12.7% to 9.321 billion yuan in '23, with revenue from the mainland China market falling 92.7% year on year to 163 million yuan, and revenue from sales to the US market increased 8.2% to 4.084 billion yuan. The company helped major customers continue to increase the share of closed recombustive products, while strengthening the special-purpose atomization product matrix, and strengthened warehousing and channel construction. Revenue from European and other markets increased 8.9% to 5.074 billion yuan.

Single-use products performed well, and technology research and development continued to advance: In 23, the company launched FEELM Max, an upgraded ceramic atomization core technology platform, which achieved more quantity and better taste on a compliance basis, entered the major customer supply chain and achieved large-scale shipments. Revenue from disposable electronic atomization products increased 74.5% year-on-year to 3.37 billion yuan. In addition, it also launched the FEELM TURBO ceramic series, automatic oil filling and charging series, etc. Furthermore, in the field of special atomization, the company launched a new product matrix, completely changed the user model, improved taste and convenience, launched the MOYAL Lanzhi brand in the field of atomized beauty, and completed the layout of three drug delivery devices and pharmaceutical preparations for asthma and COPD in the field of atomization medicine, all of which were approved by European and American drug regulatory agencies.

Private brand business development is good, product iteration continues, and marketing capabilities have improved comprehensively: in 23, the company's own brand business revenue increased 26.0% year on year to 1,847 billion yuan. In terms of products, the XROS series launched earlier increased by about 54% year on year and has become the most contributing product line. New COSS and ARMOUR series have also been launched one after another, with innovative automatic liquid injection and charging functions. In terms of marketing, the company has comprehensively expanded marketing digitalization, completed digital management of marketing channels, and completed local team building and consumer insight capabilities in major markets Continual improvement.

Profit forecast and rating: We expect the company's 24-25 net profit to be 16.98 billion yuan and 19.75 billion yuan, respectively, with year-on-year growth rates of 3.2% and 16.3%. The closing price on June 7 corresponds to 28.3 and 24.3 times PE in 24-25 years. Referring to comparable company valuations, considering the company's high technical and customer barriers, the corresponding reasonable value range is 7.84 to 8.40 yuan (corresponding to HK$8.52 to HKD 9.13, converted according to HK$0.92). Give it an “better than the market” rating.

Risk warning: Downstream demand is weak, and industry policies have changed significantly.