Event: Lisheng Sports released its 2022 annual report and 2023 quarterly report. The company achieved revenue of 258 million yuan in '22, down 8.04% from '21; it achieved net profit of 76.3955 million yuan, a loss compared to '21. In 23Q1, the company achieved revenue of 92,4691 million yuan, an increase of 71.30% over 22Q1; it achieved net profit of 10.2602 million yuan, an increase of 166.88% over 22Q1.
The company's business was under pressure from the impact of the pandemic in '22, and the sports event management business showed resilience. Both sporting events and stadium programs were under pressure in '22. Among them, the fund-raising event Xracing event could not be held; the China Go-Kart Championship, which was originally scheduled to host 6 races throughout the year, only 4 races were held; various stadiums were closed for 3 to 6 months. At the business level, the growth rates of sports event management, stadium operation, sports equipment manufacturing and sales, sports club management, marketing services, digital sports and other businesses in '22 were 12.52%, -3.10%, -1.63%, 8.28%, -38.44%, and -79.37%, respectively.
The scale of overseas events increased in 23Q1, and the Sepang 12-hour endurance race resumed, driving the company's performance in the first quarter to a record high. The company's gross profit margin in 23Q1 was 42.82%, 16.92% in the same period in '22. Net interest rate increased from -22.69% in 22Q1 to 28.44%, mainly due to the expansion of the scale of overseas tournaments. Some fees were relatively rigid, driving an increase in profitability. The company's management expenses ratio fell from 31.29% in 22Q1 to 11.79%.
The core growth point of the traditional business is to increase the strength of tournament IP and expand the “Race Card League” store. (1) In terms of new IP, the company hosted the new energy innovation competition “China New Energy Vehicle Competition and New Energy Vehicle 12 Hour Endurance Race” in '22, which has attracted mainstream NEV mass-produced models from various brands, such as ID.4 CROZZ, AITO Wanjie M5, Changan Deep Blue SL03, BYD Han, etc.; (2) The company's “Saika League” go-kart chain stores have continued to expand. By the end of 22, 10 new venues are expected to be added, and offline consumption is expected to recover with the recovery of offline consumption Number of stores and revenue per store Double liter.
In terms of digital business, the company is steadily promoting the construction of a national fitness platform and exploring new business models based on cutting-edge technologies such as AIGC and VR live streaming. (1) On the “Sports Bank” side, the urban version of “Sports Bank” and the enterprise version of “Sports Bank” have both completed the construction of product platforms. In '22, “Yuedong Circle” had a DAU of about 1.69 million people, and the company's digital sports business achieved revenue of 1,234,800.60 yuan for the first time, and achieved operating profit of 533,379.92 yuan. In the future, the company is expected to further explore AI fitness sports competitions and AI sports teaching. (2) The “VR Immersive Watching” product launched by the company in collaboration with PICO in '22 enhanced the user experience. In '23, the company will further explore the VR live streaming business and promote the construction of a VR live streaming platform for racing events.
Investment advice: The company is expected to achieve revenue of 576/773/1,014 million yuan in 23-25, and net profit of 0.77/ 19/158 million yuan. The corresponding PE is 45.7/29.8/22.3X, maintaining the “increase in holdings” rating.
Risk warning: Macroeconomics fell short of expectations; go-karting stadiums and digital businesses fell short of expectations.