Key points of investment
Event: The company released its 2022 Annual Report & 2023 Quarterly Report. ① In 2022, the company achieved revenue of 5.314 billion yuan (-27.3% YoY), net profit of 46 million yuan (-48.39% YoY), and net profit of -17 million yuan (-140.86% YoY). ② In 22Q4, the company achieved revenue of 1,554 million yuan (-27.57% year-on-year), net profit of 76 million yuan (+2757.4% year-on-year), and net profit of the non-return mother was 61 million yuan (changed from negative to positive). ③ In 23Q1, the company achieved revenue of 809 million yuan (-25.5% year-on-year), net profit of -95 million yuan (+4.92% year-on-year), and net profit of -104 million yuan after deducting net profit of -104 million yuan (+4.39% year-on-year).
The company's revenue declined in 2022 and 23Q1 due to the pandemic.
Respond positively, and gross margin bucked the trend and recovered quarterly. The company's gross margin in 2022 was 34.62%, +1.45pct compared to the previous year. Among them, the Q1/Q2/Q3/Q3/Q4 gross margin was 31.64%/34.41%/36.71%/34.90%, respectively, and the year-on-year -3.83/+0.11/+3.71/+4.02pct; 23Q1 gross margin was 30.98%, a slight decrease of 0.66 pct over the previous year, thanks to the company's active transformation efforts, including: ① The base in 2021 was lower because of poor control of material costs and optimization in 2022 Labor costs and expenses (material costs) are the main contribution; ② the company did not raise prices, but freed up profit space by controlling some market discounts and rebate policies; ③ material cost prices fell from a high level.
By business, the company's custom furniture products/supporting household products/software and technical services/O2O drainage service revenue in 2022 was 38.41/6.54/0.29/0.6 billion yuan, respectively, compared with -25.32%/-36.84%/+3%/-14.06%.
By channel, the company's direct operation/franchise/assembly model revenue in 2022 was 11.61/28.47/750 million yuan, respectively, or -38.83%/-24.67%/-32.40% compared with the same period last year.
The decline in the main business in 22H2 narrowed, and contract debt indicates that the effects of the changes will be evident. In the second half of 2022, industry competition intensified. In addition to steadily advancing the “1+N+Z” urban development strategy, the company also clarified its competitive advantages and carried out “focus on soft decoration” strategy adjustments, including: ① launching optional (optional) and optional (maintenance) packages to increase customer value; ② Organizational adjustments to the self-operated assembly business, refocusing on the headquarters and surrounding Guangfo and Shenzhen, building a template, and upgrading the entire installation to a first-level company (no longer an offline department for new homes), the group's vice president Management; ③ Transfer some direct-run stores to join to reduce losses and stimulate the organization activity. 22H1/22H2's custom furniture product revenue was 1,642/22 million yuan, respectively, compared to -27.76%/-23.40%, and the decline narrowed; 23Q1 contract debt was 707 million yuan, +13.65% from the end of 2022. The effects of the transformation have already been initially reflected. It is expected that as the impact of the epidemic weakens marginally and changes advance further, the company's operations are expected to recover continuously.
Profit forecast: We adjusted our profit forecast for the company. The company's revenue for 2023-2024 is estimated to be 61.65 billion yuan and 6.904 billion yuan, an increase of 16% and 12% over the previous year; realized net profit attributable to the parent company was 274 and 314 million yuan, up 492.5% and 14.5% year-on-year; the P/E corresponding to the stock price on April 28 was 15.5 and 13.6 times, respectively. Maintain an “increase in holdings” rating.
Risk warning: Competition in the industry is increasing the risk, the delivery of new homes falls short of expectations, and the risk of a sharp rise in raw material prices.