This report guides:

The company's performance in 2024 will turn losses into profits, and revenue will be slightly under pressure, and the follow-up will focus on the performance of WeChat e-commerce.

Investment Highlights:

Investment Advice: The company released a 2024 performance forecast to turn losses into profits throughout the year. However, considering the company's high base of Douyin explosive products in the early stage, and the uncertainty of the revenue of the channel after the subsequent Douyin channel is reduced, we have lowered the profit forecast for 2024-2026, and it is expected that the EPS in 2024-2026 will be 0.13/0.73/0.98 yuan (the original value in 2024-2026 is 0.18/0.84/1.14 yuan, a decrease of -27%/-13%/-14%), a year-on-year increase of +122.2%/+457.0%/+33.3%, referring to comparable companies, giving the company 38xPE in 2025 (see Table 1 for the valuation of comparable companies), lowering the target price to 27.82 yuan, and maintaining a "cautious overweight" rating.

Annual performance to turn losses into profits: It is expected that the company's net profit attributable to the parent company in 2024 will turn losses into profits, and the net profit attributable to the parent company will be 0.09 billion yuan ~ 13 million yuan, an increase of about 60 million yuan to 64 million yuan compared with the same period last year. It is estimated that the net profit deducted from non-attributable to the parent company in 2024 will be -04 million yuan ~ -01 million yuan, an increase of about 52 million yuan to 55 million yuan compared with the same period last year. It is estimated that the net profit attributable to the parent company in 24Q4 will be -05 million yuan ~ -01 million yuan, a year-on-year increase of 30 million yuan to 34 million yuan. It is estimated that the net profit of non-attributable to the parent company in 24Q4 will be -14 million yuan ~ -11 million yuan, a year-on-year increase of 20 million yuan to 23 million yuan.

Revenue is slightly under pressure, profit assessment comes first: The company will create an N5 Mini explosive product in the Douyin channel in 2023, achieving a high increase in revenue, and the company's revenue in 2023 will be +42.3% year-on-year, but due to the higher rate of the Douyin channel, the company's performance will still be under pressure in 2023. In 2024, the company will pay more attention to the assessment of the profit side, reduce the Douyin investment expenditure, and the performance side will improve marginally compared with 2023, but the revenue will be slightly under pressure, and we expect the company's revenue in 2024 to be -20%~-10% year-on-year. Looking forward to 2025, it is expected that the company will continue to maintain a profit-oriented business philosophy and increase its layout in new incremental areas such as Sam's new channels and overseas layout, which are expected to boost the company's performance growth.

The company's products have obvious gift attributes and are expected to benefit from WeChat e-commerce: the company's main product has obvious gift attributes, which match the demand for WeChat "gift-giving", and the company has successfully created N5 Mini explosive products on the Douyin channel in 2023, and has the gene to hit explosive products in new channels. According to the history of each round of e-commerce and channel reform in the past, it will be an opportunity for the rise and reshuffle of the brand, and actively pay attention to the channel layout of the follow-up company in WeChat e-commerce.

Risk warning: industry competition is intensifying, and the pace of overseas layout is uncertain.