Recently, Monster Charging (EM.US) announced its 2023 full-year results, achieving its first full-year profit since listing.

Financial reports show that in 2023, Monster Charging's mobile charging business GMV increased 27% year over year; annual orders increased 18.7% year over year to 656 million. While scaling up as planned, Monster Charging also took into account profit performance, and the annual adjusted net profit under Non-Gaap standards reached 108 million yuan.

From leading the scale to now balancing scale and profit at the same time, the data changes indicate that Monster Charging's growth is beginning to improve in quality. And this positive change may be related to the company's key model transformation over the past year...

Model transformation stimulates profit potential

For players in the shared power bank industry, the importance of scale is unquestionable. Achieving scale effects means brand appeal, control over the supply chain, and a higher probability of winning the game.

In terms of scale, in 2023, Monster Charging, which has always been leading in terms of market share, reached a new level. By the end of the year, Monster Charging's POI (number of points) had increased by 23.8% year-on-year to 1,234,000, and the number of online shared power banks had increased by 36.6% to 9.2 million.

Thanks to the recovery of the consumer market and further encryption of its own charging infrastructure, the cumulative number of registered Monster Charging users in the past year increased by 17.3% over the previous year to 391.5 million, while the number of mobile device charging orders rose to 656 million. It is worth mentioning that in the fourth quarter, the traditional off-season, Monster Charging orders reached 155 million, a sharp increase of 32.8% year over year. At the same time, GMV increased 42% year over year, which is a marked increase compared to previous years, showing the characteristics of the off-season.

Reflected in financial data, the scale effect also brought positive feedback. According to financial reports, Monster Charging's revenue for the year was 2,959 billion yuan, an increase of 4.2% over the previous year. Compared to the steady increase in revenue, Monster Charge's optimization of profit metrics is even more impressive. According to the data, Monster Charging's annual adjusted net profit under Non-Gaap standards reached 108 million yuan in 2023, a significant improvement over the net loss of 683 million yuan in the same period last year.

The Zhitong Finance App believes that the most critical factor contributing to Monster Charging's profit performance in 2023 is probably the transformation path of “direct management+agency” dual model collaborative development. The rapid increase in the share of agency business has significantly unleashed the company's profit potential. This year, Monster Charging added more than 4,300 agent partners. By the end of the reporting period, the proportion of agent sites had risen to 72.8%; the agency business contributed 1.8 billion yuan in revenue to Monster Charging, a sharp increase of 49.3% over the previous year.

Compared to the pure direct management model, which is heavy on assets and costs, the direct generation co-operation model that Monster Charging has vigorously promoted in the past two years helps reduce self-allocated fixed asset investment, and minimizes pressure costs while maintaining a relatively fast pace of expansion.

Also, intriguingly, Monster Charging's new business performance is also refreshing. During the year, the company's revenue from other business contributions soared to 894.32 million yuan, an increase of 264%. According to information, Monster Charging's other businesses include advertising services and new businesses. Since no further data has been disclosed on Monster Charging, there is currently no way to know which businesses are contributing to the growth momentum of this sector, but judging from changing trends, this sector may bring a greater increase in performance in the future.

Direct generation joint ventures drive medium- to long-term development

In the big consumer industry, for leading enterprises that have formed a scale effect, liberalizing franchise authority to develop agency business can almost be described as “standard”, because only in this way can the potential for brand expansion be stimulated to the greatest extent.

Take the hotel industry as an example. Currently, all of the leading domestic hotel groups initially started with direct management. For example, Jinjiang Star only liberalized joining after the number of stores exceeded 80. However, after 2010, increasing the share of franchisees almost became a consensus among leading players in the industry.

Looking back at the shared power bank industry, from a business perspective, it can be said that direct management and agency models are naturally complementary. For example, thanks to the rich management experience and outstanding resource advantages of the direct management team, Monster Charging clearly has an advantage when seizing leading positions under the direct management model. This can also be seen from the cooperation it has reached with high-quality KA customers such as Universal Beijing Resort, Shanghai Disney Resort, and KFC.

As direct management continues to infiltrate more KA and unleash brand effects, agents can use brand potential to efficiently expand the empty market and the sinking market. According to information, under the direct generation co-operation model, Monster Charging added a net of 45,000 new POIs during the 23Q4 period, while the net increase for the whole year was 237,000. By the end of last year, Monster Charging's charging infrastructure had covered nearly 2,100 counties and county-level cities.

As the direct management team concentrates resources and energy on KA and higher quality points, the quality of POI managed per business personnel will be effectively improved, and personnel efficiency will be further optimized.

Compared with the direct management model, the asset-light agency model has a better cost structure and more flexible cooperation methods. Under the agency model, the brand can continue to efficiently expand and sink into more high-potential scenarios and regions. According to reports, under the parallel drive of the direct generation, Monster Charging has added more POI types. Among them, transportation hubs have led the growth of POI types, and GMV for non-traditional application scenarios such as office buildings, banks, and medical care has increased markedly, with a year-on-year increase of more than 50%.

Taken together, the direct generation co-operation model allows Monster Charging to find the optimal balance between scale expansion and stable profit, and ultimately forms a virtuous cycle of complementary advantages and collaborative development through flexible adjustment and combination of the two models.

Finally, returning to the perspective of capital markets, investors are also happy to see companies that balance scale and profit. One positive sign is that with the strengthening of the company's own “hematopoietic” ability, Monster Charging's strength and ambition to give back to shareholders is also “soaring.” Earlier, Monster Charging announced that it will pay dividends for the first time in the company's history in June of this year. Each ADS (American Depositary Shares) is 0.03 US dollars, and the total amount of cash dividends distributed this time is about 8 million US dollars.

At a time when fluctuations in the global capital market continue to intensify, Monster Charging, which has achieved stable profits under the direct generation co-operation model, has both high fundamental growth expectations and generous dividend “bottoming out”. It is self-evident that its allocation value is both offensive and defensive. By the end of 2023, Monster Charging's book cash reserves were still sufficient. Cash and cash equivalents, short-term investments, and restricted cash reached 3.3 billion yuan, more than double the market value, and the current price was clearly undervalued. After the results were announced, 1 agency participated in the rating and gave strong buying suggestions. The target price was 1.1 US dollars.

What can be expected is that Monster Charging's stock price will recover one after another, driven by an upward trend in fundamentals and high dividends, and is expected to return to a strong operating channel in the future.