Performance summary: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 2.39 billion yuan, +13% year-on-year; net profit of 190 million yuan, +11.9% year-on-year; and net profit deducted 220 million yuan, +4.1% year-on-year. Looking at a single quarter, 2023Q3 achieved revenue of 860 million yuan, +27.2% year-on-year; realized net profit of 0.6 billion yuan, -6.2%; and realized net profit of 120 million yuan after deducting non-return to mother, +36.6% year-on-year. Performance has been relatively well repaired.
Gross margin has maintained steady growth, and profitability is expected to continue to improve. During the reporting period, the company's overall gross margin was 35.1%, +3.8pp, and the single Q3 gross margin was 38%, +8.5pp. The gross margin improved markedly in the third quarter, mainly due to the depreciation of the RMB exchange rate and the optimization of the customer order structure, the share of high-margin products increased. In terms of cost ratio, the company's total expense ratio was 24%, +4.2pp, sales expense rate/ management expense rate/ financial expense rate/ R&D expense ratio was 11.9%/9.3%/-2%/4.8%, respectively, and +2.3pp/- 1.9pp/+4.3pp/-0.5pp. The increase in sales expenses was mainly due to the company's increased investment in brand and store opening marketing; the increase in financial expenses was mainly due to a decrease in exchange revenue, where the single Q3 financial expense rate was +10.6pp year on year. Furthermore, the company lost about 50 million yuan in long-term equity investment in the third quarter, mainly due to fluctuations in the value of foreign-invested joint ventures. Overall, the company's net interest rate was 7.8%, -0.1pp, and the net interest rate for Q3 alone was 7.5%, -2.7pp. Profitability is temporarily under pressure due to exchange effects.
Major customers in North America maintain a high market share, and small to medium customers continue to expand. Inventory removal from major overseas customers gradually came to an end in the first three quarters, orders gradually returned to normal, revenue in the third quarter maintained relatively rapid growth under a low base, and cooperative relationships with major customers such as Taipul-Silian and Shuda-Simmons were stable. According to the company's financial report, 2,078 million smart electric beds were imported from the US in 2022, and the sales volume of smart electric beds exported by the company to the US was 1.052 million, accounting for 50.6% of the US smart electric bed imports, maintaining a leading market position. At the same time, the company is developing new customers one after another. New customers in the European market are growing rapidly, which is expected to gradually contribute to the company's revenue growth.
Domestic sales strengthen the promotion of the “Schuford” brand and promote the construction of offline store channels. In the first three quarters, the company strengthened brand building, seized the opportunity of increased discussions on smart beds after the Winter Olympics, and strengthened consumers' awareness of the “Schuford” brand through new media, e-commerce platforms, image spokespersons, press conferences and exhibitions. In terms of products, the company's products are different from ordinary electric beds. They use one-key sleep as the core, and provide sleep solutions with digital product functions such as intelligent relaxation and intelligent decompression. The products have differentiated advantages. In 2023, H1 “Shuford” direct stores were located in Beijing, Shanghai, and Suzhou, and 17 dealerships were opened in 13 cities including Hangzhou. It is expected that more stores will open in the future, providing a window for product experience and brand promotion.
Profit forecasts and investment advice. The 2023-2025 EPS is expected to be 0.70 yuan, 0.83 yuan, and 0.94 yuan, respectively, and the corresponding PE is 17 times, 14 times, and 12 times, respectively. Considering that the company's export customer stickiness is high, risk resistance is strong, and domestic sales are growing rapidly, it maintains a “buy” rating.
Risk warning: the risk of large fluctuations in raw material prices, the risk of large fluctuations in exchange rates, the risk of increased international trade friction, the risk of additional production capacity projects not progressing as expected, and the risk of increased competition in the industry.