Description of the event

The company's 22-year revenue/net profit/net profit after deducting non-net profit was 5,314/0.46/-017 million yuan, compared to -27%/-48% /conversion loss; of this, 22Q4 revenue/net profit after deducting non-net profit was 15.54/0.76/061 million yuan, -28%/+2757% /loss turned into profit: 23Q1 revenue/net profit of Fumo's net profit/net profit after deducting non-net profit of 809/-0.95/-104 million yuan, -26% year on year.

Incident comments

Revenue during the adjustment period is under pressure, and the terminal boom is expected to gradually spread backwards in the near future. Revenue fell 27% in '22. By product, revenue from custom home products/supporting household products/assembly business fell 25%/37%/42%, accounting for 72%/12%/9% respectively; by model, revenue from the franchise/direct management/assembly model fell 25%/39%/32%, accounting for 54%/22%/14% respectively. 22Q4 revenue fell 28% due to the impact of the pandemic. 23Q1 revenue fell 26%, and terminal consumption is gradually improving, but the boom has not yet been fully reflected at the reporting level. Contract debt at the end of Q1 improved 14% compared to the end of '22. It is expected that it will be realized to the Q2 revenue side later through transformation transmission, driving a month-on-month improvement in the growth rate.

Gross margin improved in '22, and measures to reduce costs and improve efficiency continued to advance. Gross margin increased 1.4 pcts at the same time in '22. Among them, the gross margin of customized/supporting household products was +0.4/-3.0pcts year on year, and the gross margin of franchise/direct operation/assembly models was +3.4/-2.8/-0.6pcts. The 22 sales/management/R&D/finance expense ratio was -0.5/+0.8/+0.6/+0.9pct year-on-year. Among them, the decline in the sales expenses ratio was mainly due to strengthened control, such as a reduction in the number of employees in '22 to 11138 people at the end of the year (decrease 28%), and employee remuneration in sales expenses and Benefits/publicity expenses fell 28%/40%, the overall expense ratio increased by 1.8 pcts, and the main reason for the cost dilution effect was weak: in 22 years, the gross margin increased by 0.4/0.9 pct.22q4, the gross margin increased by 4.0 pcts, the sales/management expenses ratio fell 4.0/0.7 pcts, and the gross margin for return/non-net profit increased 4.8/4.3 pcts.23q1 gross margin fell 0.7 pct (slight decrease of 0.1pct), and the management/R&D/finance ratio increased 0.8/0.6/0.6pct, return to mother/ After deducting non-net interest rates, the same decrease was 2.6/2.9 pcts. This year, the company will continue to focus on reducing costs and improving efficiency on the material side, adjusting the workforce, and optimizing cost investment to improve profits.

Optimize the channel structure, and the “1+N+Z” model helps improve the efficiency of the entire chain and deepen terminal coverage. 1) Directly operated cities: The company promotes the “1 (large store) +N (direct management/franchise store) +Z (integrated store)” model. As of the end of 22, it had 72/303 direct-managed/franchise stores. Compared with the net change of -18/+14 at the end of 21, it is expected that subsequent direct-managed stores will be further streamlined. Positioned as a superstore as a brand display and multi-dimensional support for dealers in logistics and delivery, while speeding up the terminal coverage of multi-format stores and expanding the business of packaging and assembly; 2) Franchise cities Promote “1 (total distribution) +N (franchise/distribution store) +Z (installation enterprise integration) The “store)” model reduces the comprehensive operation requirements of “N” vendors by leveraging local resources and systematic advantages (such as warehouse support, etc.) to improve front-end multi-channel customer acquisition. By the end of '22, the number of company franchisees was 2,056.

Focus on customization+supporting the main business with traditional advantages to promote high-quality development. This year, the company will focus on customization and supporting fields with traditional advantages. Through the package model represented by “choose as you like”, expand the competitive advantages of its supply chain system and information technology system, deliver a more collaborative and personalized product portfolio, while increasing investment and channel expansion efforts and deepening the penetration of retail terminal layouts. The integrated business will focus on Guangzhou, Foshan, and Shenzhen, and develop with model exploration and capacity refinement as the guide; furthermore, the company's introduction of JD as a strategic investor may take advantage of JD's traffic and supply chain advantages to enhance the competitiveness of existing businesses.

The company's net profit for 23-25 is estimated to be 25/35/ 420 million yuan, and the corresponding PE is 17/12/10 times.

Risk warning

1. Real estate sales and acid workers fell short of expectations; 2. The growth of the company's customized categories fell short of expectations.