XCST’s revenue/attributable net profit (NP)/recurring NP were RMB+2,203mn/ +23,708.9k/-7,147.3k for 1H24 (-6.05/-43.82/-141.51% yoy) and revenue/ attributable NP were RMB1,151mn/18,712.0k for 2Q24 (-0.86/-18.81% yoy). In light of constrained consumer demand for massage equipment at home and abroad, we adjust our 2024/2025/2026 EPS forecasts from RMB0.28/0.33/0.41 to RMB0.27/0.32/0.40. We value the stock at 25x 2024E PE, at par with its peers’ average on Wind consensus. Our target price is RMB6.75 (previous: RMB8.40). Maintain BUY.

Operations strained, impairment provisions weighed on earnings
XCST logged revenue/attributable net profit (NP)/recurring NP of RMB5,030/103/30.77mn (-16.50/+1.16/-78.09% yoy) for 2023; revenue/attributable NP reached RMB1,279/8.10mn (-3.71/-75.88% yoy) for 4Q23 and RMB1,051/5.00mn (-11.15/-73.92% yoy) for 1Q24. As non-recurring losses like inventory impairment/forex losses have weighed on corporate earnings, we estimate 2024/2025/2026 EPS at RMB0.28/0.33/0.41 (previous: RMB0.32/0.35/-). In light of the company’s continued focus on its main business and endeavors to hike the proportion of self-owned brand revenue, we value the stock at 30x 2024E PE, a premium over its Wind consensus-based peers’ average of 25x, for our target price of RMB8.4 (previous: RMB8.96). Maintain BUY.
operations under pressure, focusing on main business
Revenue for 2023 contracted 16.50% yoy. By product, revenue from massage chairs/small massagers/healthy environment businesses shrank 13/21.21/20.42% yoy to RMB2,162/1,539/653mn. In response to the continued adjustments in the external market, XCST has been focusing on its core main business of massage chairs & wellness products, in an attempt to make its self-owned brands more competitive. The proportion of revenue from self-owned brands to its total edged up yoy to 51.46% in 2023. XCST’s operations remained under pressure in 1Q24, with revenue down 11.15% yoy.
GPM improving, non-operating gains adding to profit volatility
For 2023, the GPM climbed 4.84pp yoy to 37.07% and the sales expense ratio gained 2.68pp yoy to 21.03%, bringing the gap between the two to 16.04% (+2.16pp yoy). The company’s business has become more lucrative thanks to its continued adjustments to business structure. However, in 2023, given the RMB84.29/32.55mn of asset/credit impairment loss provisions, its attributable NPM merely rose by 0.36pp yoy. Its attributable NPM shrank 1.14pp yoy in 1Q24 due to the yoy decline in non-operating gains.
Risks: weak demand for massage; unsuccessful business diversification; RMB appreciation.

　　投资要点：
　　2023年公司收入、业绩承压。奥佳华2023年实现营收50.30亿元，同比降低17%；实现归母净利润1.03亿元，同比增长1%；实现扣非归母净利润0.31亿元，同比降低78%。其中，Q4单季度实现营收12.79亿元，同比降低4%；实现归母净利润0.08亿元，同比降低76%；实现扣非归母净利润-0.10亿元，同比转负。2024年Q1单季度实现营收10.51亿元，同比降低11%；实现归母净利润0.05亿元，同比降低74%；实现扣非归母净利润-0.10亿元。2023年全球经济复苏乏力，外部环境的复杂性、严峻性、不确定性上升，叠加公司计提信用、资产减值损失，公司收入、业绩端持续承压。
　　聚焦保健按摩主业，国内外市场保持领先地位。2023年公司继续对非核心、非盈利、大投入项目进行裁减，剥离并关闭与公司主营无关的子公司共6家，经营重心实现进一步向主业聚焦。国内市场方面，23年公司实现营收15.25亿元，同比+19.67%。线上市场，公司品牌持续聚焦天猫、京东、抖音三大核心平台，组建覆盖各核心平台的自播团队，同时加强在各个主流社交和垂直类平台的内容运营，为核心渠道持续引流，在核心平台的品牌市场排名稳中有升。线下市场，公司进一步加强与国内中高端渠道体系合作，线下客流量、店效、经营业绩均实现提升。海外市场方面，23年公司实现营收33.81亿元，同比-26.58%。公司在几个核心市场分别布局了多个自主品牌，并通过本土化运营成为当地领导品牌，OGAWA奥佳华”主要布局于东南亚市场，是亚洲排名前二的按摩椅品牌；FUJI”在中国台湾市场市占率位列第二；“cozzia”在北美市占率位列第二；“medisana”在欧洲的市占率位列前三。
　　24Q1毛利率环比改善。2023年公司实现毛利率37.07%，同比提升4.84个pcts，期间费用方面，2023年销售费用/管理费用率分别增加2.68/0.90个pcts至21.03%、7.45%。2023年公司分别计提信用、资产减值损失0.33、0.84亿元，最终录得净利率2.27%，同比小幅提升0.42个pcts。24Q1公司实现毛利率38.66%，同比下降1.21个pcts，但环比提升1.59个pcts；24Q1录得净利率0.49%，同比下降1.17个pcts。
　　下调盈利预测，维持“增持”评级。当前国内外市场保健按摩等非必需消费品需求仍较为疲软，我们下调盈利预测，预计2024-2025年分别可以实现归母净利润1.70、2.29亿元（前值为2.68、3.44亿元）新增2026年盈利预测为2.97亿元，同比分别+64.3%、+35.3%、+29.3%。我们以荣泰健康、倍轻松作为可比公司，可比公司24年平均PEG为0.81倍，公司24年PEG为0.78倍，对应当前市值有5%上涨空间，维持“增持”投资评级。
　　风险提示：原材料价格波动风险，汇率波动风险；终端市场需求不及预期风险。