The company announced its three-quarter report for 2023 on October 26. The company's revenue for the first three quarters was 3.755 billion yuan, an increase of 0.99%, and net profit was 416 million yuan, an increase of 6.17%. Q3 The company's profit level fluctuated in the single quarter due to domestic demand and lack of consumer confidence. We expect the recovery in domestic demand to drive continuous improvement in business conditions and maintain the buying rating.
Key points to support ratings
Q3 Revenue remained steady, and net profit fluctuated. The company's revenue for the first three quarters was 3.755 billion yuan, an increase of 0.99%, and net profit was 416 million yuan, an increase of 6.17%. In Q3, the company's revenue for the single quarter was 1,298 million yuan, a decrease of 2.81%, while net profit was 132 million yuan, a decrease of 22.19%. Q3 revenue and net profit were affected by insufficient domestic consumer confidence and weak overseas demand.
In terms of domestic business, the company continues to optimize online and offline channels, and actively opens stores in offline channels while optimizing channel quality. The online channel actively lays out multiple platforms, grasps traffic entrances, and improves marketing efficiency in the context of increased competition. We judge that the overall domestic business remains stable. Lexington's business is under some pressure due to the high inflation environment in the US, and there is still a lot of room for improvement in production capacity utilization. We judge that in Q3, Lexington's business is still under pressure, and we expect that stabilizing overseas demand will drive the business to a solid recovery.
Optimizing the product structure drives an increase in gross margin and a short-term increase in the cost ratio. Q3 The gross margin for a single quarter increased by 1.86pct to 43.14%. We judge that the increase in gross margin means that the company continues to optimize its product structure and firmly increase the customer unit price. The company's Q3 single-quarter expense ratio increased in the short term, and the sales/management expense ratio increased by 3.54pct/0.68pct to 24.47%/5.59% year-on-year. The company continued to invest in sales expenses to support front-office business, but fluctuations in domestic demand affected the cost investment effectiveness. Net interest rates also fell 2.62 pct to 10.02% due to the increase in the cost ratio. As domestic demand and export fundamentals gradually solidify, we expect subsequent profit levels to pick up. The number of days for the company's inventory turnover in January-September was 201 days, an increase of 14 days. Fluctuations in domestic demand had a certain impact on the company's inventory, and overall it was still within a manageable range. Net operating cash flow for the first three quarters was 593 million yuan, up 311.99% year on year. The cash flow situation was good.
I am optimistic about the long-term growth of the company's multi-channel expansion. The company focuses on bedding research and development and launches products with different positioning brands to cover multiple levels of demand. While the company's offline channels continue to sink and expand, the company optimizes channel quality and combines the rapid development of new online retail business, while overseas channels are actively expanding production capacity. We are optimistic that business data will continue to improve in the context of improving consumer sentiment and the continuous optimization of the product structure of companies.
valuations
Under the current share capital, considering that there is still uncertainty about the recovery of domestic demand, and US household demand falls short of expectations, we lowered EPS from 2023 to 2025 to 0.73/0.82/0.91 yuan; corresponding PE was 14/12/11 times, respectively. Considering that the company has significant leading advantages in the home textiles business and increasing the quality and efficiency of online channels, there is plenty of room for future growth. Maintain the buy rating.
The main risks faced by ratings
Channel expansion fell short of expectations, domestic demand recovery fell short of expectations, and sales of new products fell short of expectations.