Event: On April 29, the company released 2022 and 2023Q1 results. In 2022, the company achieved revenue of 3,901 million yuan/+38.75% year on year, net profit of -265 million yuan (same period last year: -70 million yuan), of which Q4 alone achieved operating income of 864 million yuan/-24.19% year on year, net profit of -471 million yuan (same period last year -554 million yuan); 2023Q1 achieved operating income of 1,102 million yuan/+37.22% year on year, net profit of -38 million yuan Yuan ($87 million for the same period last year).

The shoes will soon be sold out, and the marketing business is expected to resume high growth. 1) In 2022, offline sales of the company's footwear business were greatly disrupted, and operations continued to lose money. At the same time, the company increased promotional efforts to quickly digest inventory. The current inventory quantity and inventory age have all improved dramatically. The impact of this stock business on performance is expected to be drastically reduced in 2023; 2) Under external disturbances, the company's marketing business sector's product supply and logistics operations have been operating abnormally for a long time, but the company still showed strong operational resilience under pressure. The company achieved live streaming GMV of about 15 billion yuan throughout the year, an increase of about 50% over the previous year. Among them, GMV reached about 15 billion yuan throughout the year, an increase of about 50% over the previous year. 3.187 billion yuan/+38.4% year on year, product SKUs reached 40,000/+45% year on year. Judging from the revenue split, annual advertising advertising/advertising agency/social e-commerce achieved revenue of 1.24/11.18/2,332 billion yuan respectively, -23.96%/+194.92%/35.27%, respectively; 3) The fashion media business was under pressure due to the influence of macro factors.

Promote non-standard and remote visibility to enhance long-term competitiveness. The company is committed to strategic upgrading, building four major business segments: live e-commerce, supply chain, full-case marketing, and digital world. It signed 25 new artists throughout the year, totaling 51, and signed more than 100 celebrities and amateur anchors. At the same time, the company actively entered the non-standard clothing category, and the relevant anchor matrix was continuously improved. Currently, it has 6 anchors of over 100 million anchors and 24 over 10 million anchors; at the back end, it has relied on Yuanwang Cloud to create SOP for live streaming and make organizational adjustments, establish standardized processes and specific indicators, and apply them to clothing supply chain infrastructure Construction, actively preparing an area of more than 150,000 square meters The Fu-Shake project was completed and became a remote future station and a remote dream station; experimenting with multi-platform layouts, they entered channels such as Bilibili and video numbers to improve the layout.

Accruals and amortization affected full-year profits, and gross margin came under pressure in the first quarter. 1) Amortization expenses related to equity incentives were generated in 2022, and after estimation by Fashion Feng Xun and Beijing Shixin, they also accrued 44 million yuan in goodwill impairment losses. On the other hand, due to the impact of lower sales prices and increased discount rates in the footwear business, bad debts and inventory price reduction provisions of about 291 million yuan were collected throughout the year. 2) The gross margin of the company in 2022 and 20231 was 17.78%/9.11%, respectively +1.62/-17.40pct. The first quarter was under pressure. On the cost side, there was a steady decline. The expense ratio for the 2022 and 2023Q1 periods was 15.76%/12.64%, respectively.

Announcing the 2023 business plan: In 2023, the company will adhere to the beautiful vision of “technology streamlines work, products beautify life”, and use technology as the core means to carry out comprehensive upgrades and innovation to further build technological competitiveness and promote the company's high-quality development: 1) Technology streamlines work, beautifies life, embraces the AI era, and comprehensively upgrades “Remote Vision Cloud” into “Remote Vision Cloud AIOS”, jointly build AI virtual human technology to create a virtual live streaming matrix; 2) promote standardization of live streaming processes, support large-scale replication, build multi-layer anchor matrices to meet industry trends ; 3) From IP self-management to platform-based development, a full traffic system is beginning to appear, and an important strategic milestone “shakes” and is expected to open within the year; 4) Promote diversified revenue development, six major business segments, and create a closed marketing loop.

Investment advice: As the leading MCN in the domestic live e-commerce industry, the company has achieved coverage of three major platforms, has strong supply chain resources and an anchor matrix, and will continue to cultivate in the future. As the consumer environment recovers, policy side optimization continues, and performance is expected to be further unleashed. We expect the company to achieve net profit of 595/893/1,342 million yuan respectively in 2023-2025, maintaining the “buy” rating, with a target price of 30 yuan.

Risk warning: Stricter industry regulation risks; increased competition risks; macroeconomic risks.