Incident Overview
The company's 2023 revenue/net profit attributable to mother/ net profit after deduction of non-attributable net profit/operating cash flow were 1,456/1.07/1.04/279 million yuan, respectively, up 1.40%/-24.05%/-24.97%/23377.83% year-on-year. Excluding fair value change losses ($0.07/0.03 billion in 22/23), asset impairment losses ($0.09/014 million in 22/23), and government subsidies ($0.11/0.06 billion in 22/23), net profit to mother was $117 million, a year-on-year decrease of 19.3%; mainly due to government subsidies; operating cash flow was higher than net profit due mainly to increased inventory removal from various channels in the independent brand business and increased inventory management in export sales, which reduced inventory and operating accounts payable. The company plans to pay a cash dividend of 12 yuan for every 10 shares to all shareholders in '23, with a dividend rate of 74.93% (56.7% in '22) and a dividend rate of 3.8%.
Judging from the improvement trend, Q1 export sales ushered in improvement, and domestic sales revenue and profits are still under pressure. 23Q4, the company's revenue/net profit attributable to mothers/ net profit after deduction was $3.01/-0.03 billion, a year-on-year decrease of -8.15%/131.17%/149.86%. The sharp decline in net profit to mother was mainly due to a decrease in gross margin and an increase in asset impairment losses; 24Q1 revenue/net profit/net profit after deduction of non-net profit was 3.56/0.32 billion yuan, up 3.75%/9.28%/16.87% year on year.
Analytical judgment:
Export sales revenue declined due to a decline in orders in '23 due to the impact of the overseas environment. Export revenue was $517 million, a year-on-year decrease of 22.95%; the gross margin of export sales in '23 was 28.45%, up 4.85PCT year-on-year. We estimate that the net export interest rate and net profit declined. Export sales experienced a weak improvement in 24Q1, with export sales revenue of 210 million yuan, an increase of 14.03% over the previous year.
In '23, there was a high level of offline growth and a slowdown in 24Q1. Online is still digesting a high base, and profits are under pressure during the price war. Damu's (online+group purchase) revenue was 840 million yuan, up 32.95% year on year. Among them, Damu's online/group purchase revenue was 3.30/ 510 million yuan respectively, up 3.50%/62.94% year on year. The gross margin of online/group purchases in '23 was 35.14%/23.58%, a year-on-year decrease of 2.71/5.66PCT. We estimate that net profit from domestic sales is still under pressure. We estimate that DaMu's net interest rate and net profit declined slightly in '23. In 24Q1, DaMu's revenue was 121 million yuan, down 10.4% year on year. Among them, Daimu's online/group purchase revenue was 0.44/78 million yuan respectively, down 20.81%/2.30% year on year. The gross margin of online/group purchases in 24Q1 was 38.62%/23.03%, respectively, an increase of 2.73/-2.75PCT over the previous year.
Joining Komaki in '23 is better than direct management. The revenue of Komaki (direct management+franchise) in '23 was 0.86 million yuan, up 16.62% year on year, of which Komaki direct-management/franchise revenue was 0.19/ 0.67 million yuan respectively, up -11.08%/27.90% year on year (number of direct-run stores/store efficiency increased by -16%/5.85% to 210,000 yuan respectively, number of franchisees/store efficiency increased by 2.15%/25.2% to 1.9 million yuan to 350,000 yuan respectively); gross margin of direct management/ franchise in '23 was 54.53%/33.44% year on year, up year on year 1.23/-1.08PCT. In 24Q1, the revenue of Komaki (direct management+franchise) was 0.19 million yuan, up 4.8% year on year, of which direct operation/franchise revenue was 0.04/0.15 billion yuan, up -11.59%/10.74% year on year (number of direct-operated stores/store efficiency increased by -20.8%/11.7% to 194 million yuan respectively, and number of franchisees/store efficiency increased 6.5%/4.0% to 198 households and 75,000 yuan respectively). 24Q1 direct management/franchise gross margin was 55.64%/37.06% respectively, down 1.09/-5.14PCT year on year.
Gross margin remained flat, and the decline in net profit margin was mainly due to an increase in the cost ratio during the period. (1) The company's gross profit margin in '23 was 28.32%, a year-on-year decrease of 0.01PCT.
By product, the gross margins of tents and equipment/apparel and shoes/accessories and others were 27.86%/35.69%/27.53%, respectively, a year-on-year decrease of 0.01/-0.51/6.62PCT. (2) The company's net interest rate in '23 was 7.3%, a year-on-year decrease of 2.46PCT; judging from the expense ratio, the sales/management/R&D/finance expense ratios in '23 were 8.64%/6.63%/1.92%/0.36%, respectively, with a year-on-year increase of 1.76/0.63/-0.60/0.34PCT. Among them, the increase in the sales expense ratio is mainly due to increased investment in labor costs, e-commerce platform fees and insurance premiums due to the growth of independent brand business, increasing investment in promotion fees, exhibition fees, and travel expenses to expand the market; the increase in management expenses is mainly due to increased investment in building and upgrading the core management team and upgrading system management; and the increase in financial expenses is mainly due to the year-on-year decrease in exchange rate income due to exchange rate changes. Net gain/revenue from fair value changes in '23 was -0.19%, up 0.31PCT year on year; income tax/revenue was 2.08%, a decrease of 0.3 PCT year on year; asset impairment loss/income increased by 0.36 PCT year on year, mainly due to a higher decline in accrued savings compared to the same period last year and depreciation preparation for foreign investment projects. (3) The company's gross profit margin in Q1 in '24 was 27.67%, up 1.18 PCT year on year, with a net margin of 8.9%, and an increase of 0.4 PCT year on year. Judging from the cost ratio, the 24 Q1 sales/management/R&D/finance expenses ratio was 5.53%/7.90%/1.78%/0.94%, respectively, with a year-on-year increase of -1.72/2.06/0.12/-0.46PCT. The share of net investment income decreased by 1.35 PCT, the share of other income decreased by 0.23 PCT, the share of fair value net income increased by 1.05 PCT, the share of credit and asset impairment losses decreased by 0.38 PCT, and the share of income tax increased by 0.56 PCT.
Inventories have been improved. Inventory at the end of 23 was 595 million yuan, a year-on-year decrease of 14.5%. The number of inventory turnover days was 223 days, an increase of 8 days;
Accounts receivable were 143 million yuan, up 34.8% year on year. The number of accounts receivable turnover days was 31 days, an increase of 7 days year over year. Inventory at the end of 24Q1 was 567 million yuan, a year-on-year decrease of 14.6%. The number of inventory turnover days was 203 days, a year-on-year decrease of 40 days. Accounts receivable were 239 million yuan, an increase of 32.03% year on year. The number of accounts receivable turnover days was 48 days, an increase of 10 days year on year.
Investment advice
According to our analysis, (1) domestic sales are expected to improve revenue growth in the second half of the year. Online estimates are under pressure, and there is still room for improvement in domestic sales penetration in the long term; (2) Q1 export sales revenue gradually improved. With the recovery of overseas demand, the company is expected to seize the opportunities of customer order migration and continue to expand the North American market share with the global production capacity layout and quick reverse advantages of Bangladesh, Vietnam, and China. The previous profit forecast was lowered, and the 24-25 revenue forecast was lowered to 1,566/1,752 billion yuan, adding 1,977 million yuan; the 24-25 net profit to mother was lowered to 162/197 million yuan to 128/148 million yuan, and the net profit forecast for 26 years was increased by 186 million yuan; corresponding to the 24-25 EPS reduction of 2.43/2.96 yuan to 1.92/2.22 yuan, and an additional 26-year EPS forecast of 2.79 yuan. The closing price of 32.00 yuan on April 29, 2024 was 17/14/11X for 24-26 PE, respectively, maintaining a “buy” rating.
Risk warning
The increase in camping penetration rate fell short of expectations, and the supply of campgrounds fell short of expectations, a systemic risk.