Core views

23Q3's revenue was 653 million yuan/ +0.88%. Among them, online, direct management, franchise, group purchases and other revenue were 229 million yuan/ -2.9%, 145 million yuan/ +2.1%, 195 million yuan/ +0.8%, 84 million yuan/ +10.5%, respectively. The revenue growth rate of all Q3 channels improved month-on-month, and e-commerce channels were still under pressure due to factors such as declining traffic from traditional platforms. Direct channel store efficiency recovered first, and franchise store efficiency was still under pressure, but in strengthening the third- and fourth-tier cities, the franchise economy was still under pressure. Revenue growth has been steady under the influence, The target is to increase the number of stores by about 100 in 23 years, mainly franchise stores. The share of offline channels benefiting from 23Q3 gross margin increased. Under active fee control, the fee rate dropped significantly, driving an increase in net interest rates.

occurrences

The company released the three-quarter report for 2023:23Q1-3 has a revenue of 1.93 billion yuan/ -2.9%, net profit of 350 million yuan/ +5.7%, net profit of 3.1 billion yuan/ +5.9%, net cash flow from operating activities of 320 million yuan/ +8.2%, and EPS of 0.42 yuan/ +5.0%.

Among them, 23Q3 revenue was 653 million yuan/ +0.88%, net profit of 127 million yuan/ +9.2%, net profit of non-return net profit of 113 million yuan/ +15.5%, net cash flow from operating activities was 39 million yuan/ -61%, and EPS was 0.15 yuan/ +9.3%.

Brief review

In 23Q3, the revenue growth rate of all channels improved month-on-month, e-commerce was still under pressure, direct-run stores were running steadily, and plans to actively open stores were progressing steadily. The company's revenue for the first three quarters of 23 years was 1.93 billion yuan/ -2.9%, of which online, direct management, franchise, group purchases and other revenue were 760 million yuan/ -5.1%, 457 million yuan/ -3.8%, 518 million yuan/ -1.2%, and 190 million yuan/ +4.0%, respectively.

Looking at the third quarter alone, online, direct management, franchise, group purchases and other revenue were 229 million yuan/ -2.9%, 145 million yuan/ +2.1%, 195 million yuan/ +0.8%, and 84 million yuan/ +10.5% respectively. The revenue growth rate of all channels improved month-on-month in the third quarter. E-commerce channels were still under pressure due to factors such as declining traffic from traditional platforms, and the efficiency of direct channel stores recovered first. Franchise store efficiency is still under pressure, but revenue growth in third- and fourth-tier cities is still under steady growth. Net increase of about 100 stores, mainly Mainly franchise stores.

The share of offline channels benefiting from 23Q3 gross margin increased, and the expense ratio dropped significantly, leading to an increase in net interest rate. 23Q3 The company's gross margin was 55.4% /+1.5pct, which is an increase in the share of revenue from direct management and franchise channels with high gross margin. Q3 Sales, management, R&D, and financial expenses were 25.6% /+0.2pct, 4.3% /- 1.3pct, 3.3% /- 0.7pct, and -0.4% /- 0.1pct respectively. Under active fee control, the overall cost rate declined markedly. The increase in gross margin combined with a decrease in the expense ratio led to an increase in net profit margin of 1.5 pct to 19.5% in Q3.

The number of days of inventory turnover has declined, and the quality of operations continues to improve. 23Q3 The company's inventory is 789 million yuan/ -10.9%, and the number of inventory turnover days is 239 days/-8 days. The company focuses on inventory control and focuses on steady management under the current consumption pattern. In the context of overall pressure on online channels, inventory is still gradually being eliminated, and business quality continues to improve.

Profit forecast: The company's revenue for 2023-2025 is expected to be 31.4, 34.3, and 3.72 billion yuan, an increase of 2.0%, 9.0%, and 8.6%; net profit is 5.76, 6.30, and 689 million yuan, an increase of 7.9%, 9.4%, and 9.3%. The corresponding PE is 12.6, 11.5, and 10.5 times, maintaining the “buy” rating.

Risk warning:

The deepening retail discount rate affects brand profit margins: At the beginning of '23, the industry's inventory was generally high. If some brands remove inventory by deepening the discount rate, it will intensify industry price competition, which in turn will affect the company's brand discount rate level. The deepening discount rate will have an impact on the brand's profit margin.

The progress and magnitude of the recovery in turnover fell short of expectations: It is expected that in '23, with the gradual recovery of travel and consumption, the flow performance of the company's various channels will also directly benefit. If the flow recovery of the company's brands progresses or falls short of expectations, it will affect the company's operating performance.

Store development has fallen short of expectations: New store development is one of the important drivers of the company's offline channel revenue growth. If the company's store development progresses less than expected, it will directly affect the company's revenue performance.

Recently, we received a letter of concern from the Shenzhen Stock Exchange: The company received a letter of concern from the Shenzhen Stock Exchange on October 9, 2023. The main concern is whether the performance evaluation indicators in the company's draft sixth restricted stock incentive plan are reasonable and whether they can play an incentive role. The company issued a response notice on October 21 to respond to the letter of concern.