Incidents:

The company announced its 2024 three-quarter report. The first three quarters achieved revenue of 1.108 billion yuan, a year-on-year increase of 19.04%, net profit to mother 0.102 billion yuan, an increase of 120.78% year-on-year, and basic earnings per share of 0.12 yuan.

Comment:

In the third quarter, the company's overall management level was under pressure

In the third quarter, the company achieved revenue of 0.399 billion yuan, a year-on-year increase of 6.48%, and net profit to mother of 16.2441 million yuan, a year-on-year decrease of 33.63%. In the first three quarters, the company's comprehensive gross margin was 48.89%, down 0.12 percentage points year on year, and net margin was 7.69%, up 4.03 percentage points year on year. The consolidated gross margin for the third quarter was 44.74%. The month-on-month changes were 2.16 percentage points and a decrease of 10.81 percentage points, respectively; the net profit margin was 2.80%, and the year-on-month change was 4.35 percentage points and an increase of 0.67 percentage points, respectively.

In the first three quarters, the net cash flow from the company's operating activities was -0.125 billion yuan, a year-on-year decrease of 300.40%, mainly due to an increase in procurement payments, taxes and other cash related to operating activities during the reporting period.

The outdoor business remains stable, and the chip business continues to reverse losses

The company has strengthened its brand marketing efforts through projects such as “The Big Event into Heaven”, “Polar Series”, and “HIMEX Series”, and continues to implement “specialization,” “youth,” and “high-end” strategies. In the third quarter, the company's outdoor business continued the good trend of the first half of the year (in the first half of the year, the outdoor business revenue reached 0.602 billion yuan, up 11.41% year on year), and related business revenue continued to grow in the first three quarters, and the revenue scale exceeded 0.9 billion yuan. In terms of chip business, since this year, the company has made simultaneous efforts on the client side and product side to strengthen deep cooperation with strategic customers, while newly developed touch chips supporting 16:10 resolution have achieved mass production of the first batch. In the first half of this year, the company's chip business revenue exceeded 0.1 billion yuan, and operating profit reversed year-on-year losses, reaching 21.0228 million yuan. Based on preliminary data estimates, the company's chip business maintained high revenue growth in the first three quarters (revenue scale may exceed 0.16 billion yuan) and maintained a trend of reversing losses.

Profit Forecasts and Ratings

The company's outdoor products business is developing steadily. The chip business has begun to contribute revenue and profit, and the business layout continues to be rich. Under a neutral scenario, we maintained the company's 2024-2026 EPS of 0.18 yuan/0.22 yuan/0.27 yuan, corresponding to the 2024 PE of 47 times, which is higher than the comparable company average, but it is still at a relatively low level of the company's valuation in the past three years, maintaining a “gain” rating.

Risk warning

The risk that competition in the industry will continue to increase

China's outdoor industry brands have the characteristics of low brand concentration and fierce competition. As well-known foreign brands have established a good user reputation and a broad market base environment, local brands are facing greater competitive pressure; at the same time, domestic brands rely on sound domestic industrial chain supply capabilities to rapidly improve product brands, product design, functional technology, etc., keenly grasp changes in domestic consumption structure and consumer demand, and seize market share. Competitive pressure from domestic and foreign brands will continue or even increase.

Trend control risk

With the development and evolution of social economy and information technology, the age group of the company's target consumer group, the focus on their emotional experiences, and personality expressions are also constantly changing. If the product consumption preferences of the main target consumer groups change greatly due to the above reasons, and if the company's product design, marketing methods, etc. are not adjusted in a timely and effective manner, it will cause deviations from the consumption preferences of the target consumer group, which may adversely affect the company's business performance.

Risk of inventory depreciation

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 part of the 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.

Technology upgrade iteration and innovation risks

The chip business is a high-tech industry. It is a technology-intensive industry. Upgrades are rapid. Technology research and development strength is one of the key factors for companies in the industry to maintain their continuous competitiveness. In order to maintain technological leadership and continued competitiveness, companies must accurately predict the technical development direction and market trends of relevant 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.

Risk of impairment of goodwill

Due to the company's foreign investment and mergers and acquisitions, a certain amount of goodwill is formed in the consolidated balance sheet. If future subsidiary performance falls short of expectations, there may be a risk of impairment of goodwill, which will adversely affect the company's future business performance.