Introduction to this report:
The company's net profit for the full year of 2023 decreased year-on-year, and large single products broke through and cost reduction and efficiency measures formed a positive impetus; Q4 is under pressure in the short term, and factors such as large discounts are expected to drag down profits.
Key points of investment:
Investment advice: The company's performance is under pressure in the short term, and we lowered our profit forecast. EPS for 2023-2025 is -0.56/0.88/1.31 yuan (original value was 0.28/1.38/1.70 yuan), +61%/+257%/+49% year-on-year. Comparable companies (see valuation table) have an average valuation of 25x in 2024. Considering that the company has a difficult reversal logic, the growth rate for the next two years is higher than that of comparable companies. We expect the company to pay a certain valuation premium. We expect the company to be 35 x PE in 2024. Considering the uncertainty about maintaining the company's large single product model, the target price was lowered to 30.70 yuan, and the rating was lowered to a “cautious increase in wealth” rating.
Performance summary: Estimated revenue of 11.25 to 1,375 million yuan in 2023, +25.6% to 53.5% year over year, 2023Q4 revenue of 1.83 to 433 million yuan, -25.7% to +75.5% year over year. The net profit for 2023 is estimated to be -3550 to -53.3 million yuan, a year-on-year loss reduction of 71.2% to 56.8%, and 2023Q4's net profit to mother of -1,832 to 36.12 million yuan, a year-on-year reduction of 73.4% to 47.5%.
Short-term performance is under pressure, and net profit is reduced year-on-year: the company's Q4 performance is expected to be under pressure in the short term. The main reasons are: 1) strong seasonal discounts, which have an impact on product profit margins; 2) calculation of one-time gains and losses such as asset impairment losses. Net profit in 2023 was reduced by about 8871-70.1 million yuan compared to 2022, mainly due to the adoption of large single product breakthroughs to drive performance, and at the same time, the company continued to deepen cost reduction and efficiency, which had a positive impact on overall gross margin.
The focus of 2024 is new product iteration and distribution promotion: In 2024, the company will launch many new products one after another, and the product iteration and new category layout are worth looking forward to; in addition, the company will increase its franchise channel layout in 2023, and the pace of opening stores is expected to accelerate in 2024.
Risk warning: There is uncertainty about new products and explosions, and there is a risk of price competition in the industry