In 2023Q3, the company achieved revenue of 1.41 billion yuan, +0.3% year-on-year. Excluding European business, 2023Q1/Q2/Q3 revenue was -15%/+10%/+17%, and revenue accelerated month-on-month. The decline in raw material prices, channel structure changes, cost reduction and efficiency, and changes in cost investment strategies have clearly improved the company's profit. The net profit margin for 2023Q3 was 13.62%, +3.38 pcts over the previous year. Looking ahead to Q4, it is expected that with the steady increase in the company's share of packaged sales, the launch of joint promotional activities, and increased investment in live e-commerce, the company's fundamentals are expected to continue to recover.
Excluding Europai's business, revenue increased month-on-month, and profit improved markedly. The company achieved operating income of 3.81 billion yuan in 2023Q1-Q3, -8.4% year-on-year (excluding European business, +5% year-on-year revenue), net profit of 520 million yuan, +21.4% year-on-year, and net profit margin of 13.62%, +3.38 pcts year-on-year. In 2023Q3, the company achieved revenue of 1.41 billion yuan, +0.3% year-on-year. Excluding European business, 2023Q1/Q2/Q3 revenue was -15%/+10%/+17%, and revenue accelerated month-on-month. 2023Q3, the company's net profit was 160 million yuan, +37.5% year-on-year, and the net profit margin was 11.57%, +3.12 pcts year-on-year.
Continue to promote package sales. 2023Q1-Q3, the company's mattresses/bed frames/sofa/bedding/other revenue was 1.79 billion /1.15 billion /290 million /220 million /3.1 billion yuan, accounting for 47.1%/30.2%/7.7%/5.7%/8.3% of the company's total revenue, of which Q3 mattresses/bed frames/sofa/beds/other revenue was 650 million/4.2 million/110 million/90 million/120 million yuan, accounting for total revenue of 46.0%/30.1% 7.5%/6.4%/8.6%. The company continues to promote package sales. Currently, the matching rate for mattresses and bed frames is 1:0.6.
Distribution channels have been optimized and integrated, and e-commerce channels have maintained a high growth rate. 2023Q1-Q3, the company's distribution/e-commerce, direct supply/direct sales channel revenue is 2.90 billion /640 million /140 million yuan, +4.7%/+23.4%/-76.6%/-5 4.4%, of which 2023Q3 distribution/e-commerce, direct supply/direct supply/direct sales channel revenue is 1.07 billion /240 million /0.4 billion yuan, +18.0%/-79.0%/-28.6% of total revenue, accounting for 76.3%/16.7%/3.4%/2.8% of total revenue. Distribution channels: Revenue resumed growth, mainly due to the company's implementation of package sales strategies, promotion activities, and promotion of store redecoration and image improvement. 2023Q1-Q3 has opened 110 new V6 major residential stores and 663 heavy duty stores, increasing the overall number of stores slightly. The company will optimize and integrate dealers to ensure the growth of key stores.
Direct supply channels: We estimate that excluding Europai, the growth rate of the 2023Q3 direct supply business exceeds 40%. Direct sales channels:
The sharp decline in revenue is mainly due to the company's transfer of store business in Shanghai, Shenzhen and other places to dealers. E-commerce channels:
The increase in revenue is mainly due to the company's continued increase in investment in e-commerce resources. 2023Q1-Q3, Tmall's revenue has declined, JD's revenue has increased 35% year over year, and Douyin's revenue has increased 8 to 9 times year over year. The company will increase its investment in live e-commerce, and has now reached cooperation with leading anchors such as Simba. According to the performance exchange meeting, the company hopes that e-commerce revenue will account for 20% to 30% in the next 3-5 years.
The increase in gross margin led to a marked improvement in profitability. The gross profit margin of the 2022Q3 company was 50.98%, compared to +3.70pcts, mainly because: 1) channel structure changes, the company stopped the European direct supply business with low gross margin (according to our estimates, the gross margin of the European direct supply business was about 22% in 2022); 2) the price of raw materials (steel wire, sponge, etc.) fell sharply, and we estimated that it contributed 1-2 pcts to gross margin; 3) Promoting cost reduction and efficiency (reducing inefficient SKUs, implementing systems such as component standards and process standardization) and strengthening internal fine management (formulating annual performance budgets+implementing KPI) Assessment, etc.); 4) Reduce investment in some channels. The sales/management/R&D expense ratio of 2023Q3 was 29.47%/6.11%/4.31%, respectively, compared to +0.26/+0.17/+1.69pcts. The increase in the R&D cost rate was mainly due to the large number of V6 business sample designs, etc.
Risk factors: rising raw material costs; the company's e-commerce business expansion falls short of expectations; the company's cultivation of new dealers falls short of expectations; declining sales prices due to increased industry competition; real estate delivery falls short of expectations, etc.
Profit forecast, valuation and rating: Considering factors such as increased industry competition and direct supply channel adjustments, we lowered the company's 2023-2025 revenue forecast to 5.73 billion/6.33 billion/6.88 billion yuan (the original forecast was 6.17 billion/6.83 billion/7.51 billion yuan). Considering the decline in raw material prices, changes in channel structure, and steady progress in cost reduction and efficiency, we maintain the company's net profit forecast for 2023-2025 at 8.0 million/890 million/990 million yuan.
Referring to the CITIC Home Furnishing Industry Index Wind's unanimous estimate, corresponding to 17 times the PE valuation in 2023, considering that the company is the leading high-end mattress brand in China, has high product premiums, a perfect channel control system, and a certain scarcity, the company is given 20 times PE in 2023, with a target price of 40 yuan, and maintaining a “buy” rating.