Core views
The company's various businesses grew steadily in 2023, and the 24Q1 e-commerce business revenue and performance is expected to be mainly due to brand building and new market expansion. The company clarifies the long-term strategic plan for cross-border e-commerce business, including strengthening brand building and continuing to build the Jimew Cloud SaaS service platform. In 2023, the company launched multiple vertical models to strengthen data and technology-driven development strategies. It is expected to continue to replicate the cross-border social e-commerce model for regional expansion, provide customized FMCG packaging solutions, increase R&D investment, and build its own brand.
occurrences
The company achieved operating income of 6.695 billion yuan in 2023, +24.53% year on year, and realized net profit of 345 million yuan, +87.57% year on year; in the first quarter of 2024, it achieved revenue of 1,324 million yuan, -3.75% year on year, and realized net profit of 42.8053 million yuan, or -39.22% year on year.
Brief review
Steady growth in 2023, 24Q1 was affected by brand and market investment. Cross-border e-commerce companies achieved steady growth and increased profitability in 2023. E-commerce business revenue in 2023 was +37.02% year-on-year, packaging revenue +5.75%, and other businesses +19.10%. The cumulative gross profit margin for 2023 was 46.7%, +6.0pct; on the cost side, the 2023 sales expense ratio was 35.0%, +5.7pct year on year, management expense ratio 3.4%, +0.5pct year on year, R&D expense ratio 2.1%, and -0.6 pct year on year. Net operating cash flow in 2023 was 726 million yuan, +85.60% year over year; 24Q1 company's revenue and performance side declined year on year. Among them, packaging business revenue increased year on year and cross-border e-commerce business declined year on year. It is expected to be mainly due to the company's strategic side actively investing in brand building and new market expansion and exploration during the year. The decline in profit side is due to a decline in cross-border e-commerce net profit and an increase in amortized share payments. The 24Q1 gross profit margin was 35.4%, -0.4 pct year-on-year. On the cost side, the sales expense ratio was 7.5%, +0.7pct year over year.
The management fee rate was 18.7%, -1.4pct year-on-year. The financial expense ratio was 6.7%, +1.5pct year-on-year.
Operating cash flow - 158 million yuan, -599.6% year over year, is mainly due to the combined impact of e-commerce business advertising fees, payment of personnel wages, and the year-on-year increase in raw material procurement expenses for the packaging business. Overall, the company clarified that the long-term strategic plan for cross-border e-commerce business includes strengthening brand building and continuing to build the Jimew Cloud SaaS service platform.
The cross-border e-commerce business continues to iterate technology, promote brand building, help new growth companies always adhere to the “data-driven, technology-driven” digital operation strategy, and is committed to becoming a comprehensive online+offline marketing solution provider. The company's cross-border social e-commerce model forms a unique “product finder” model through accurate positioning, intelligent product selection, and accurate marketing of AI algorithms. In 2023, the company launched a number of vertical models, including the e-commerce text vertical model ChatGiikin-6b, the e-commerce intelligent design and material generation vertical model GiiAI, and the intelligent marketing assistant G-king, etc., to build a “data+intelligent algorithm” barrier to enhance intelligent product selection, landing page generation, and advertising development, advertising delivery, procurement, and after-sales service capabilities. While improving independent stations in the future, the company is actively incubating its own brands. Currently, the company has built brands including SENADA BIKES, Veimia, Konciwa and PETTENA, etc., and its products cover electric bicycles, underwear, umbrellas and pet products. The company continues to build Jimiuyun SaaS, exporting mature business process links, business systems and application modules in the form of commercialization; the packaging business is currently building 10 large-scale packaging and printing production bases across the country. The balance of projects under construction at the end of 2023 decreased by 73.6% compared to the beginning of the year, and the Hushi Jihong Intelligent Environmental Packaging Industrial Park project project, which is mainly the packaging business, and the equipment to be installed and commissioned has been completed and put into use. In the future, it is expected that the company will continue to rely on the steady development of e-commerce and packaging core business, replicate the cross-border social e-commerce model for regional expansion, provide customized FMCG packaging solutions, increase investment in R&D, and build its own brand.
Investment advice: Net profit due to mother is expected to be achieved from 2024 to 2026 of 408 million yuan, 503 million yuan, and 592 million yuan. Based on the closing stock price of 12.27 yuan on June 6, 2024, the corresponding PE is 12X, 9X, and 8X, respectively. For the first time, coverage gives an “increase in holdings” rating.
Risk analysis
1. The rapid rise in global shipping prices during the year, the risk of increased fulfiling-side costs due to the possibility of longer flight distances and tight capacity, as well as the possible impact of business growth;
2. Competition in the cross-border e-commerce business is becoming increasingly intense, with higher requirements for accurate delivery, brand capability building, and consumer and market awareness. It also places higher demands on the cultivation of private traffic and ecosystem building of independent websites, which may face the impact of increased competition; 3. In the process of incubating its own brand and continuing to expand into new markets, the company may face factors such as risk identification and high upfront investment on revenue and performance;
4. Consider the performance forecast under a cautious scenario. Assuming that the revenue growth rate of e-commerce businesses is 15% from 2024 to 2026, and the overall gross margin is affected by the global shipping pattern and the impact of expanding brands and new markets, and assuming that the overall gross margin for 2024 to 2026 is 45.46%, 45.72%, and 46.04%, respectively, then the net profit corresponding to 2024 to 2026 is 330 million yuan, 387 million yuan, and 405 million yuan, respectively; 5. Risks that may arise from other operating sides and macro environments.