Minsheng **shares*** Xu Haoliang and Du Jiaxin recently conducted research on Zhiou Technology and released a research report "2023 Performance Forecast Comments: Beautiful Performance as Scheduled, New Regions & New Products Open Growth Space", this report gives a ** rating to Zhiou Technology, and the current stock price is 2271 yuan.
Zhiou Technology (301376).
Event: On January 30, 2024, Zhiou Technology released an announcement on the expected increase in performance in 2023. The company expects 2023 operating income of 602-61.0 billion yuan, a year-on-year increase of 104%-11.8%；Net profit attributable to the parent company 40-4.200 million yuan, a year-on-year increase of 599%-67.9%；Net profit not attributable to net profit is deducted 42-4.400 million yuan, a year-on-year increase of 671%-75.1%, the performance was in line with expectations. The company expects 2023Q4 single-quarter operating income of 188-19.600 million yuan, a year-on-year increase of 409%-46.9%；Net profit attributable to the parent company 114-1.3.4 billion yuan, a year-on-year increase of 443%-69.6%；Net profit not attributable to parent company is deducted 107-1.2.7 billion yuan.
The supply problem was gradually solved & the peak season effect, and the operating income in Q4 increased by 41%-47%. The company has carried out the reconstruction and optimization of the ** chain in 23H1, and there is a frictional shortage; With the problem of shortage of goods being solved & new products being launched, the operating income in the Q4 peak season has increased significantly. The company said on the interactive platform that in 2023, the company's total sales in the "Black Friday and One" activities on the Amazon platform in the European and North American markets increased by 78% year-on-year. On the one hand, the European warehousing and logistics layout is earlier, on the other hand, European residents tend to consume branded products, and the company's three own brands Songmics, Vasagle and Feandrea have been recognized and welcomed by consumers in Europe; Europe contributed 61% of overall revenue in 23H104%, we judge that the proportion of European revenue in 2023 may continue to be at a high level of 60%+.
Multi-factor resonance, profit growth faster than revenue. Based on the median value of the performance forecast, the company's net profit margin attributable to the parent company in 2023 will be about 677%, an increase of 2 year-on-year74pct, mainly due to: 1) sea freight has decreased significantly since the second half of 2022, superimposed on the impact of procurement cost reduction, and the cost of main business has decreased; 2) The exchange rate of the euro, the US dollar and the renminbi appreciated compared with the same period last year; 3) Inventory turnover is accelerated, saving storage costs.
Looking forward to 2024, revenue & profit may achieve a growth rate of about 20%. In terms of revenue: the company may focus on the United States, which is subject to obstacles such as competition pattern & tariffs & high tail-mile logistics costs in the early stage, and the growth rate of the U.S. market is not as fast as that of Europe; With the gradual improvement of overseas warehouses in the United States, the continuous improvement of self-delivery ratio & delivery timeliness, and the company's focus on the needs of American consumers to launch new products and optimize SKUs, we are optimistic about the acceleration of regional growth. In terms of profit, we judge that the company's net profit margin may be slightly under pressure, mainly due to: 1) the relatively low profit margin in the US market, which may affect the overall profit margin with the increase in its proportion; 2) In the context of the Red Sea incident, the freight rate sent to Europe via the Cape of Good Hope route will be delayed by about 7-15 days; At the same time, the cost of last-mile delivery has risen, putting pressure on the company's profit margin. In this regard, the company increased the layout of warehousing and logistics in the United States, and carried out global sourcing of the first chain to reduce the impact of U.S. tariffs; As of December 23, the company has 3 self-operated warehouses in North America with a total area of 7430,000 square meters; We expect margins to improve steadily in the U.S. region. At the same time, we believe that the company may increase the selling price of goods in the European market to hedge the impact of sea freight rates.
Investment suggestion: The company carries out high-quality promotion on the basis of increasing the market share of existing single products, and the logic of product expansion is smooth; At the same time, the company actively deploys overseas warehouses & optimizes the chain to continue to reduce costs; New channels such as SHEIN, TikTok, and Mexican Meikeduo have opened up room for growth. It is estimated that the company's net profit attributable to the parent company in 23, 24 and 25 years will be 41/5.1/6.200 million yuan, corresponding to PE of 22X 18X 15X, maintaining the "Recommended" rating.
Risk warning: the risk of terminal consumer demand falling short of expectations, sea freight, exchange rate and other large fluctuations.
A total of 13 institutions have rated the stock in the last 90 days, with 11 ** ratings and 2 overweight ratings. The average institutional price target over the last 90 days is 3103。
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