Core view: (Unless otherwise specified, the currency units in this article are all in RMB)
Play with IP co-branding, superimpose eye-catching design capabilities on high frequency, and create a differentiated new retail brand.
In the current consumer environment, “low prices” for products that are in high demand, such as household goods, have limited effect on stimulating consumption. Retailers need to increase the emotional value and face value of products to consolidate product strength.
Based on the brand upgrade strategy, the company's product structure was upgraded from 100% cost-effective products to “30% brand upgrade +70% cost performance”. The company aims to become the number one IP design retail group in the world, and proposes to achieve 50% IP product sales and 50% cost-effective product sales structure by 2028. The company continues to optimize the category structure, and the increase in the share of IP revenue can continue to drive the Group's overall gross profit margin. The company's IP has been in operation for a long time, and its own brands have strong availability and bargaining power for major domestic and international IP licenses; at the same time, it has rich experience in IP operations and is supported by strong supply chain capabilities to guarantee the frequency and quality of new products.
The company has a forward-looking layout in overseas markets, and has achieved initial results. The next five years will still be the main expansion drive, and the group aims to quadruple its overseas business in the next 5 years. The company is relatively mature in the Asian and Latin American markets, and the future will focus on cryptographic layout; the US and European markets contribute the main force to future profits, and are still in the early stages of channel expansion, and there is plenty of room for growth.
Based on the main brand, TOPTOY's IP strategy combines external procurement and exclusive self-creation. It will increase the room for profit imagination with its own IP-related products, and cover a wider range of target groups than the main brand by expanding trendy toy categories such as building blocks.
Profit forecasting and investment advice. The company has excellent comprehensive capabilities. The restoration of store efficiency and store expansion are being promoted together, and performance growth can be expected. The company's adjusted net profit for 24-26 is estimated to be $2.84/3.52/4.22 billion, respectively, giving the company 20 times PE in 24 years, corresponding to a reasonable value of US$25.28 per ADS for US stocks and a reasonable value of HK$49.39 per share for Hong Kong stocks, all maintaining a “buy” rating.
Risk warning. The reduced willingness of franchisees to cooperate has led to a slowdown in store expansion, which will affect the company's future performance growth; new product development falls short of expectations; and product originality and quality and safety issues.