Breo(SH:688793) Guotai Junan Securities·2024-05-10 07:32Investment Rating - The report assigns an "Accumulate" rating to the company, with a target price of 38.62 CNY, up from the previous target of 30.70 CNY [2][24][25]. Core Insights - The company has shown operational improvement and has turned a profit in Q1 2024, with expectations for continued earnings growth [2][24]. - The 2023 revenue reached 1.275 billion CNY, a year-on-year increase of 42.3%, while the net profit attributable to shareholders improved to -51 million CNY, a significant increase from -124 million CNY in 2022 [14][24]. - The company has adjusted its earnings forecasts for 2024-2026, projecting EPS of 1.10, 1.42, and 1.67 CNY respectively, reflecting increases of 286%, 29%, and 17% year-on-year [24][25]. Revenue Performance - The company experienced explosive growth in shoulder massage products, particularly the N5 Mini, which contributed to a revenue increase of 438.85% in this category [14][15]. - Online sales through platforms like Douyin accounted for 68.9% of total revenue in 2023, with a year-on-year growth of 46.7% [15][16]. - Domestic revenue grew significantly, reaching 1.2 billion CNY, while overseas revenue declined by 6.61% due to a strategic shift away from ODM sales [16]. Profitability - The gross margin improved to 59.29% in 2023, up 9.5 percentage points year-on-year, with a net margin of -3.94% [17][24]. - In Q1 2024, the gross margin further increased to 62.78%, indicating a positive trend in profitability [17][24]. Cash Flow and Efficiency - The company reported a net cash flow from operating activities of 82 million CNY in 2023, a significant improvement from the previous year [22]. - Inventory turnover days decreased, indicating enhanced operational efficiency [21]. Investment Recommendations - The report suggests that the company's operational improvements and profitability recovery warrant an "Accumulate" rating, with a revised target price reflecting these positive developments [24][25].