Endogenous revenue fell 2.6% in '22, net profit of endogenous mother increased 8.0%, and net profit of Gimo increased by 16.3% to $2,823 million, and net profit of Gimo increased 560.1% to 431 million yuan. This was mainly due to the sharp reduction in impairment losses from the previous period and the confirmation of investment income from the transfer of Senkawa shares. Excluding the impact of profit and loss from the merger of Senkawa and repurchase transactions, the company's internal revenue fell 2.6% to $2,531 million in '22, and net profit increased 8.0% to $236 million. In addition, the company's 23Q1 revenue fell 43.5% to 348 million yuan, and its net profit fell 70.7% to 012 million yuan. We judge that it was mainly due to the Q1 terminal retail market still under pressure and the base difference caused by Chikawa's announcement. After excluding the influence of the Senkawa merger, 23Q1 endogenous revenue fell 22.9% and Guimo's net profit fell 54.7%. We expect EPS of $0.97/1.16/1.35 in 23-25, respectively. Referring to the comparable company Wind's 23-year average PE forecast, considering that the company's channel layout is inferior to that of comparable companies, it was given 14 times the target PE in 23 years, with a target price of 13.58 yuan, maintaining the “buy” rating.

Distribution revenue was under pressure due to external environmental disturbances. Looking at the accelerated development of new assembly channels by category, overall wardrobe/finished product accessory/door and window revenue in '22 was -6.2%/-13.5%/-55.7% compared to 19.12/1.17/027 million yuan. Benefiting from the advancement of household strategies, cabinet business revenue in '22 bucked the trend and increased 37.2% to 288 million yuan; in terms of wooden doors, revenue from wooden doors fell 55.6% to 375 million yuan in '22, mainly due to the launch of Chikawa's business in Q3. Looking at individual channels, distribution revenue in '22 fell 10.2% to 2,210 billion yuan; direct operating revenue increased 10.2% to 90 million yuan; at the same time, the company actively laid out new channels and increased cooperation with leading installation companies. The scale of the assembly business grew by more than 60% year-on-year in '22. Furthermore, the bulk revenue in '22 fell 43.5% to 418 million yuan, mainly due to Qianchuan's report. Among them, Haolaike's own bulk business scale increased by 297.8%.

Gross sales margin increased 1.2 pct year on year, net operating cash flow increased 15.7% year on year 22, and the company's gross sales margin increased 1.2 pct to 35.2% in 22. We judge that this was mainly due to the company strengthening lean management and the increase in gross margin in categories such as wardrobe/cabinets. The expense rate increased by 1.1 pct to 22.1% during the 22-year period. Among them, the sales/management+R&D expense rate/financial expense ratio increased by 0.6/0.4/0.1pct to 10.1%/10.7%/1.2%, respectively. The company's various expenditure investments declined from the same period in '21, and the increase in the cost rate was mainly due to a decline in revenue. Furthermore, net cash flow from the company's operating activities increased 15.7% year-on-year to 343 million yuan in '22. We determine that this was mainly due to a decline in the share of bulk business.

After the release of the report, Senkawa focused on retail to maintain the “buy” rating

Considering that retail sales are still under pressure in Q1, the retail revenue forecast was lowered. Net profit attributable to the mother for 23-25 is estimated to be $302/361/419 million ($333/403 million before 23-24 years), and EPS is $0.97/1.16/1.35 yuan respectively. Referring to the comparable company Wind in '23, they agreed to expect 16 times the average PE value. Considering that the company's channel layout was inferior to that of comparable companies, they were given 14 times the target PE in 23, with a target price of 13.58 yuan (previous value of 12.60 yuan), maintaining the “buy” rating.

Risk warning: Demand recovery fell short of expectations, real estate sales fell sharply, and raw material prices rose sharply.