Description of the event
The company disclosed the three-quarter report: In the first three quarters of 2023, the company achieved operating income of 942 million yuan, a year-on-year increase of 45.1%, net profit of 16.3314 million yuan, a year-on-year improvement of 41.198 million yuan, and net profit of 21.762 million yuan, a year-on-year improvement of 41.193 million yuan. In the third quarter of 2023, the company achieved operating income of 342 million yuan, a year-on-year increase of 79.81%, net profit of 9.015,100 million yuan, a year-on-year improvement of 31.0864 million yuan, and net profit of 7.4377 million yuan, a year-on-year improvement of 31.2466 million yuan.
Incident comments
The company's quarterly revenue rebounded and increased, and operating profit reversed losses. The company achieved a 45.1% year-on-year increase in revenue in the first three quarters. Among them, the year-on-year changes in the first three quarters were -7.93%, 76.08%, and 79.81%. The company experienced a rebound in growth from the second quarter and continued to grow rapidly in the third quarter, or mainly due to: 1) The company invested strategically in the Douyin channel, forming a strategy of introducing traffic to other e-commerce platforms and offline direct-run stores to drive “big single products”, strengthening Douyin channel launch and rapid launch of the company's full channel volume.; 2) Import “flash projects” offline,” “Traditional Chinese Medicine Craft Activities”, “Fast Massage Program”, “Douyin Local Life”, and “Meituan Flash Sale”, through various marketing models, multi-channel stores, and user settlement, achieving monthly growth in the average revenue of offline direct-run stores; 3) The company's product promotion results are remarkable. Neck N5 Mini shoulder and neck massager, See5K children's smart eye care device, Seek Pro hot and cold eye massager, Neck 5 Lite neck massager, Scalp 3 scalp massage comb, and Neck D5 neck massager brought strength to the company Revenue growth momentum, etc. On this basis, the company's gross margin for the third quarter increased sharply by 10.59 percentage points year on year, or related to the company's promotion of new products and effective cost control. At the same time, under high revenue growth, the sales expense rate fell 0.29 percentage points year on year, the management expense rate fell 2.44 percentage points year on year, the R&D expense rate fell 3.09 percentage points year on year, and the financial expense ratio fell 0.49 percentage points year on year. Overall, the company's operating profit for the three quarters (gross profit - sales expenses - management expenses - R&D expenses - sales tax and surcharges) was 71221 million yuan, an improvement of 35.8528 million yuan over the previous year, and the operating profit margin increased 17.17% year over year. The corresponding company achieved a net profit of 7.4377 million yuan in the third quarter, a year-on-year improvement of 31.2466 million yuan.
In addition to increasing investment in the Douyin channel and optimizing directly-managed store operation strategies, the company is also actively adjusting and optimizing the franchise model, which is expected to further open up the incremental market. In addition to the original multi-channel Internet customer acquisition channel, the company signed contracts with two provincial retail service providers in Shandong and Jiangsu, and officially launched a new business model for investment promotion for provincial retail service providers. Through the existing channels of provincial retail service providers, the company will effectively develop blind spots in the market, especially the penetration and development of second-level, third-level and even sinking markets, increase domestic brand awareness, and gradually penetrate the layout of multiple outlets in the province through the excellent market expansion capabilities of provincial service providers, “with a bit of side”, the brand influence will spread to surrounding office buildings, residential areas and other core areas, giving full play to the synergy between brands and stores, so as to open up better segmented incremental markets.
Investment suggestions: The company is deeply involved in smart portable massagers and has its own brands “Breo” and “Double Easy”. The product brings good health experience to users, creating significant domestic and foreign brand effects. On this basis, the company is actively launching new products and optimizing channel strategies, which is expected to achieve new high-quality development. The company's net profit from 2023-2025 is expected to be 0.17, 1.02 and 145 million yuan respectively, corresponding to 2024-2025 PE of 31.2 and 21.8 times, respectively, maintaining the “buy” rating.
Risk warning
1. There is a risk that demand will fall due to macroeconomic fluctuations;
2. Increased competition poses the risk of reduced profitability.