净利润持续受海外亏损影响，国内业务高质量增长

Investment Rating - The report maintains a "Buy" rating for the company, with a target price range of 8.6-9.2 RMB, corresponding to a 2024 PE of 14-15x [2][8][13] Core Views - The company has been expanding its stores against the trend, which has significantly contributed to revenue growth and gross margin improvement [2] - The domestic revenue growth of the company's three growth-stage brands is impressive, with continued optimism for the steady growth of the main brand and the growth potential of the sub-brands [2] - The overseas business incurred losses in 2023, leading to a significant impairment of goodwill, which negatively impacted net profit [2] - The overseas business continued to underperform in Q1 2024, and it is expected to have a negative impact on the full-year net profit for 2024 [2] - Revenue expectations are maintained, but net profit forecasts are revised downward, with projected revenues of 3.24/3.65/4.10 billion RMB for 2024-2026, representing YoY growth of 11.2%/12.7%/12.1% [2] - Net profit for 2024-2026 is expected to be 230/310/370 million RMB, with YoY growth of 118.8%/35.9%/17.8% [2] Financial Performance - In 2023, the company's revenue increased by 21.7% YoY to 2.915 billion RMB, with a gross margin improvement of 4.0 percentage points to 67.8% [12] - Net profit attributable to shareholders increased by 416.6% YoY to 106 million RMB, with a net profit margin improvement of 3.2 percentage points to 5.6% [12] - Excluding the impact of goodwill impairment, the net profit attributable to shareholders would have been 225 million RMB, in line with previous expectations [12] - Operating cash flow increased by 52.7% YoY to 480 million RMB, with a dividend payout ratio of 82.6% [12] - In Q1 2024, revenue grew by 12.5% YoY to 750 million RMB, but net profit attributable to shareholders decreased by 32.2% YoY to 30 million RMB, mainly due to increased losses in overseas operations [12] Brand Performance - The main brand, Ellassay, saw a 21% YoY increase in revenue [12] - The three growth-stage brands (SP, IRO China, and LAUREL) performed exceptionally well, with YoY revenue growth of 50%, 58%, and 47%, respectively [12] - The IRO brand, with approximately 80% of its revenue coming from overseas, achieved a 10% overall growth despite significant challenges in overseas operations [12] - Ed HARDY's revenue increased by 3% YoY [12] - The number of stores increased by 39 compared to the end of 2022 [12] Profitability and Margins - The gross margin for the main brand Ellassay increased to 71.3% in 2023, up from 67.1% in 2022 [12] - The gross margin for IRO increased to 60.9% in 2023, up from 58.7% in 2022 [12] - The gross margin for Ed HARDY increased to 55.8% in 2023, up from 46.6% in 2022 [12] - The gross margin for LAUREL increased to 74.4% in 2023, up from 71.7% in 2022 [12] - The gross margin for self-portrait remained stable at 82.8% in 2023 [12] Future Outlook - The company is expected to continue its store expansion strategy, with a focus on the steady growth of the main brand and the growth potential of the sub-brands [2] - The overseas business is expected to continue to negatively impact net profit in 2024, but the domestic business is expected to support revenue growth [2] - The company's revenue is expected to grow at a CAGR of 12.0% from 2024 to 2026, with net profit expected to grow at a CAGR of 54.2% over the same period [2]