Overview of events
Qumei Home furnishings released its 2023 semi-annual report. 2023H1 realized operating income of 1.947 billion yuan, year-on-year-23.24%, net profit of-157 million yuan, year-on-year-224.68%, and non-return net profit of-126 million yuan, year-on-year-224.29%. In a single quarter, 2023Q2 achieved revenue of 980 million yuan,-19.93% year-on-year, and net profit of-60 million yuan, year-on-year-189.63%. In terms of cash flow, the net cash flow generated by 2023H1's operating activities was 364 million yuan, + 81.42% compared with the same period last year, mainly due to the reduction in the payment of purchased goods and taxes during the reporting period; the net cash flow generated by fund-raising activities was-446 million yuan,-591.14% compared with the same period last year, mainly due to the increase in loan repayment during the reporting period.
Analysis and judgment:
Revenue side: the overall income is under temporary pressure, and overseas orders are gradually stabilizing.
Domestic Qumei business: during the reporting period, Qumei brand achieved income of 541 million yuan,-12.62% compared with the same period last year, mainly due to the mild operation of the domestic economy, superimposed real estate sales facing certain pressure, terminal household demand to maintain a low recovery, macro adverse environment has a certain impact on the company's domestic income. During the reporting period, the company continued to deepen product innovation. On the one hand, through new products such as "Pier sofa" and "Qumei Lab variable tables and chairs", combined with the construction of online content assets, to promote the growth of e-commerce business, on the other hand, with "2023 New B8", "Riverside", "Ji Mu", "Yang" and other products as the starting point, combined with the window period of offline channel recovery, to promote store image upgrading and investment promotion. The number of Qumei household brand dealers increased by 40, showing a good trend of recovery. In addition, the company's bulk business orders on hand continued to grow, and the outstanding contract amount exceeded 200 million yuan, an increase of 30% compared with the same period last year, and is optimistic about the continued improvement of the bulk business of the company downstairs.
Overseas Ekornes business: during the reporting period, Stressless, IMG and Svane achieved revenue of 10.84,2.48,83 million yuan respectively, compared with-23.92%,-37.75% and-21.48% respectively. The global furniture market continues to be affected by the economic downturn. In the first half of 2023, consumer demand in Europe and the United States, the company's overseas core income region, was relatively weak, and the company's overseas business declined, which was an obvious drag on the overall performance. During the reporting period, the company's overseas business focused on endogenous development. On the one hand, it continued to improve the channel penetration of uncomfortable chair products such as electric chairs, functional sofas and dining chairs, and began to sell soft beds and mattresses in major market areas in the second quarter of 2023 (by the end of June 2023, the monthly sales of mattresses and soft beds of Stressless brand products had exceeded 6 million yuan). On the other hand, actively infiltrate the Chinese and North American markets, innovate channels and sales models in the Chinese market, and encourage dealers to develop high-efficiency, high-return, low-input department stores and shopping malls, which perform well; while in the North American market, it continues to sink through the channel through buyers, tapping potential incremental opportunities at multiple levels. Since the second quarter, overseas business orders have gradually stabilized and achieved positive year-on-year growth, and we expect the company's overseas business to be repaired in the second half of the year as overseas furniture inventory bottoms out.
Profit side: profitability has declined under multi-factor disturbance
In terms of profitability, 2023H1's gross profit margin and net profit margin were 30.72% and-8.28% respectively, respectively, compared with the same period last year. Among them, Q2 single-quarter gross profit margin and net profit margin were 31.26% and-6.38% respectively, and-1.53pct and-11.91pct respectively compared with the same period last year. The company's profitability has declined a lot, and we expect that overseas financing costs will continue to rise during the reporting period due to the Fed's interest rate hike; while raw material costs have fallen at a high level, they are still at a high level compared with the same period last year. As a result, under many unfavorable factors, the company's profitability is under greater short-term pressure.
In terms of period expense rate, 2023H1 company's period expense rate is 37.12%, year-on-year + 7.70pct, among which, sales expense rate, management expense rate, R & D expense rate and financial expense rate are 20.53%, 8.84%, 2.15% and 5.60% respectively, which are + 4.25pct, + 1.19pct, + 0.20pct and + 2.05pct respectively. The increase in the rate of financial expenses is mainly due to the increase in interest expenditure in the current period.
There are more and more positive factors in the company, and the inflection point opportunity appears.
From the industry level: according to the National Bureau of Statistics, retail sales of furniture above the quota from January to June in 2023 are + 3.8% compared with the same period last year. Under the background of continuous improvement in real estate completion and domestic consumer policy support for home furnishings, the home industry is expected to benefit significantly. From the corporate perspective: the overall development momentum of Ekornes's overseas subsidiaries is good, accelerating category expansion and the layout of the Chinese market; domestic business is expected to improve under the overall recovery of consumption, and the company is actively accelerating the transformation of innovation; and as the monetary tightening cycle in Europe and the United States is coming to an end, raw material costs and global shipping prices have dropped sharply, the company's profit environment continues to improve. The current stock price has been at the bottom of history, reflecting the over-pessimistic expectation of the market. We believe that with the improvement of the business environment of the industry and the continuous improvement of the company's operating capacity, Qumei's investment layout opportunity has emerged.
Investment suggestion
With the gradual increase in positive factors, we are optimistic about the performance of Qumei's follow-up domestic and foreign business, and maintain the previous profit forecast. The company's operating income for 23-25 is expected to be 43.5952.25max 6.063 billion yuan respectively; EPS for 23-25 years is 0.05pm 0.50shock 0.65 yuan, corresponding to August 30, 2023 closing price of 5.53RMB / share, PE is respectively 117-11-8 times, maintaining the "buy" rating.
Risk hint
1) M & An integration is not as expected; 2) the recovery of real estate sales is not as expected; 3) the industrial park cooperation agreement is a strategic agreement, which has the risk of uncertainty; 4) the industry competition intensifies the risk.