The company released the third quarter report of 2022: 2022Q1-3 realized revenue of 3.75 billion yuan (year-on-year + 0.2%), net profit of 160 million yuan (year-on-year-11.6%), and non-return net profit of 124 million yuan (year-on-year). The single Q3 realized income of 1.214 billion yuan (year-on-year-1.3%), net profit of 35 million yuan (year-on-year-34.4%), and non-return net profit of 36 million yuan (year-on-year-21.7%). The company's overseas market development is sound, domestic operations are still under pressure, high raw material prices, exchange rate fluctuations and other drag on profitability.
Overseas Ekornes: category expansion period, steady growth. 2022Q3 Ekornes has revenues of 1.132 billion Norwegian kroner (+ 8.8 per cent year on year) and an EBIT rate of 5.4 per cent (year on year-7.2pct). Income growth has remained solid against the backdrop of the Russo-Ukrainian war and the rise in US dollar interest rates. According to the category, 2022Q3 Stressless/IMG/Svane realized revenue of 2.18 million Norwegian kroner (+ 9.1% Universe 18.2% EBIT 16.8%) and EBIT rate of 5.64% 6.18% Universe 0.17% (respectively compared with the same period of last year-9.1pct/+0.9pct/-8.5pct). The channel penetration of the company's non-comfortable chair category (electric chair, sofa, dining chair, dining table, etc.) continues to increase, and mattress products gradually expand from Europe to the world, leading to the steady growth of overseas business. In addition, the company actively raised prices to cope with the rise in raw material prices, with inventory bottoming out in North America and steady expansion of supporting categories in Europe, Q4 is expected to operate steadily.
Domestic Qumei: brand renovated to promote, performance marginal repair. The impact of the Q3 domestic epidemic has weakened, the company is still under pressure, and the brand refurbishment plan continues to be a drag on profit performance. In terms of channels, dealers accelerate shop opening, committed to the improvement of single customer contribution value and profitability; innovative channels speed up the expansion, bulk order delivery, home decoration supply chain construction to promote the contribution of performance increment. In addition, the company actively optimizes the product structure, accurate price increases to hedge costs, SKU continues to streamline and optimize, Q4 domestic Qumei revenue, profit month-on-month repair.
Profit is under short-term pressure and expense performance is optimized. 2022Q3 has a gross profit margin of 34.3% (year-9.0pct) and a net return margin of 2.9% (year-1.4pct). The decline is mainly due to the adjustment of freight and service charges, and the high price of raw materials. In terms of cost performance, the expense rate during the single Q3 period is 29.3% (year-on-year-7.2pct), of which the sales expense rate is 17.9% (year-on-year-5.9pct), the management expense rate is 7.7% (year-on-year + 1.0pct), the financial expense rate is 1.6% (year-on-year-2.4pct), and the R & D expense rate is 2.0% (year-on-year + 0.1pct). The increase in exchange gains leads to a decline in financial expenses. It is expected that the debt swap will drive the further optimization of the financial expense rate.
The cash flow has warmed up and the operating efficiency is stable. The net operating cash flow of 2022Q3 Company was 100 million yuan (year-on-year + 50 million yuan), and the cash flow picked up slightly. The company's operating efficiency remained stable, with accounts receivable turnover days of 37 days (year-on-year + 7 days), accounts payable turnover days of 41 days (year-on-year-5 days) and inventory turnover days of 125 days (year-on-year + 6 days) at the end of Q3.
Profit forecast and valuation: overseas Ekornes brand scarcity & strong product power, domestic business is expected to continue to pick up, debt swap is promoted, and the report is expected to be greatly optimized. We expect 2022-24 net profit to be 2.1 Ekornes 3.6 / 520 million yuan respectively, corresponding to 17.5X/10.3X/7.1X for PE, maintaining the "buy" rating.
Risk hint: recurrent epidemic situation and lower-than-expected real estate recovery