The 2022 results are generally in line with our expectations

The company announced its 2022 results: full-year revenue of 7.363 billion yuan, down 15.86% year on year, net profit of Fumo was 4.2 billion yuan, down 29.38% year on year, net profit of non-return mother was 341 million yuan, down 38.81% year on year. The performance was basically in line with our expectations. Mainly due to the impact of the epidemic in 2022, the company's production and supply side were blocked, offline sales were under pressure. At the same time, the company calculated depreciation preparations totaling 61.39 million yuan. On a quarterly basis, the company's 1Q/2Q/3Q/4Q22 achieved revenue of 13.23/20.05/19.54/2,081 million yuan, a year-on-year ratio of -6.16%/-6.89%/-24.07%/-20.39%, and the net profit of the mother was -0.22/2.13/132/097 million yuan, from profit to loss/ -7.55%/-25.61%/-16.38%, respectively.

Development trends

1. Revenue from various businesses is generally under pressure, and the bamboo and stone plastic flooring business bucked the trend. 1) Wooden floors: revenue of 4.679 billion yuan, a year-on-year decrease of 23.57%, revenue share of 63.55%, gross margin of 30.57%, same decrease of 0.75ppt; 2) Medium-high density fiberboard: revenue of 1,613 billion yuan, same decrease of 13.30%, revenue share of 21.91%, gross margin of 8.91%, same decrease of 1.50ppt; 3) Bamboo and stone plastic flooring: revenue of 977 million yuan, same increase of 50.59%, revenue share of 13.26%, gross margin of 18.16%, same increase of 0.76ppt; 4) Wooden doors and cloakroom: revenue: revenue 48 million yuan, a decrease of 33.94% from the same period, accounting for 0.65% of revenue, gross margin reached 16.18%, a decrease of 8.44ppt. We expect the company's business revenue to improve as offline consumption recovers.

2. Gross margin declined in 2022, so focus on subsequent profitability recovery. The company's gross margin in 2022 was 24.14%, -1.9 ppt year on year, mainly due to rising raw materials, transportation and labor costs. 4Q22 gross margin was 24.11%, +0.2ppt over the previous year. On the cost side, the company's expense ratio in 2022 was 17.23%, compared to -0.1ppt. Among them, the sales/management+R&D/finance expenses ratio was 7.77%/9.81%/-0.34%, respectively, compared to +0.2ppt/+0.6ppt/-0.9ppt. Under the combined influence, the net interest rate in 2022 was 5.71%, -1.1 ppt year on year, and the net interest rate for 4Q22 was 4.65%, +0.2ppt year on year.

3. Omni-channel collaboration and “five in one” deepens the integration of the home. 1) Brand side: The company has outstanding brand strength on the B-side, while the company continues to promote brand rejuvenation and upgrading on the C-side and continuously innovates marketing methods. We expect the company's brand to further penetrate the omni-channel market; 2) Channel side: The company is making further efforts to reorganize households, launch a “five-in-one” strategy for floor materials, doors and walls, homes, and smart homes, promoting “integrated customization of cabinet doors and walls” with flooring as the core, while gradually improving software and smart home facilities to meet consumers' one-stop needs through product portfolio+service+design+solutions. The future of business It is expected to boost performance.

Profit forecasting and valuation

We maintain a net profit forecast of $0.97 per share for 2023, and introduce a net profit forecast of $1.08 per share for 2024. The current stock price corresponds to the 2023/2024 P/E 10/9 times, respectively. Considering changes in market risk appetite and the gradual recovery in offline home consumption, we raised our target price by 11% to 10.5 yuan, corresponding to P/E of 2023/2024 11/10 times, respectively, with 9% room for upward trend.

risks

The decline in real estate sentiment exceeded expectations, and outbreaks have been repeated in some regions.