Revenue performance is steady, profitability has improved steadily, and business resilience has been highlighted.
FY24H1 achieved total revenue of HK$9.152 billion (yoy -4%, +1.3% of RMB caliber), gross profit margin of 39.1% (+0.3 pct), net profit of HK$1.14 billion (yoy +4.0%, RMB caliber +9.8%), net profit of HK$1.29 billion (yoy +9.7%, RMB caliber +15.8%), net profit margin of 12.7% (YoY +0.9pct), net profit margin of 12.7% (+0.9pct year on year), net interest rate of the main business increased slightly, RMB revenue and profit Both achieved growth. Non-recurring profit and loss affected HK$150 million, mainly due to changes in fair value of bonds of 98 million dollars, processing of one-time fixed asset receivables and investment losses of HK$54 million.
The business in China reached HK$6 billion, the RMB caliber grew by double digits, and the online market became even more beautiful.
The main business revenue of the Chinese market was HK$6.05 billion (yoy +5.1%, RMB caliber +11%), regardless of whether the Iron Frame China region achieved revenue of HK$5.38 billion, an increase of 3%. In a market environment where consumption downgrade, real estate slump, and weak demand, the company's fundamentals performed steadily, and business resilience was highlighted. China's regional gross profit margin was 41.2% (+1.3 pct year on year). Thanks to lower raw material prices and lower ASP, overall gross margin improved slightly. Among them (1) offline channel revenue was HK$4.10 billion (yoy +0.7%, RMB caliber +6.3%); as of 24FYH1, there were 6,888 offline stores (excluding style and Suning stores), a net increase of 417. Stores maintained a slight net growth. In terms of store development, the company focused on developing stores in sinking markets and adding cost-effective series in Tier 1 and 2 cities. (2) With online revenue of 1.29 billion yuan (yoy +11.3%, RMB caliber +17.5%), the company has a strong first-mover advantage in traditional e-commerce and live TV. It adopts a sales model where simultaneous online and offline efforts are used to strengthen the promotion of live streaming online, and the brand influence is strengthened through short videos, live streaming in its own stores, and deep cooperation with leading anchors. This year, the company focused on scientific store-by-store growth management, and more refined and healthy store management.
Overseas market business achieved a good recovery in 23Q2. 24FYH1 revenue was affected by the recovery process. Excluding the impact of shipping, North America fell 5.4%. Looking forward to the second half of the year is even more worth looking forward to.
The US is the main consumer market for functional sofas. The US functional sofa mainly relies on imports. The company's production capacity and cost advantage are strong. The North American market revenue is HK$2,037 billion, a decrease of 20.5%, excluding the impact of shipping costs, a decrease of 5.4%, and the gross profit margin of 35.9% (y-5.9pct); European (excluding Home Group) and other overseas markets revenue of HK$532 million (yoy -20.6%), excluding the impact of the decline in iron frame business, the actual sofa business in Europe and other markets declined -8.8%, and gross profit ratio 27.4% (up 6.1 pct year on year) This is mainly due to the decline in the cost of raw materials.
The mattress business grew in double digits, and the decline in ASP for sofas led to an increase in sales volume.
The sofa business reached HK$6.18 billion (yoy -7.9%), with a gross profit margin of 40.0%, of which the sofa business in the Chinese market was HK$3,881 billion (yoy +1.5%), of which ASP was 7274 yuan/set (yoy -20.5%), the volume was 535,000 sets (yoy +27.6%), and the bedding business reached HK$1,491 billion (yoy +7.3%, RMB size +13.3%), with a gross profit margin of 45.2% (+2.1pct).
Profit forecast and rating: The company is the leader in functional sofas in China. It continues to forge internal skills in the changing external environment, continues to expand the market, enhance product development capabilities and differentiated competitiveness, functional furniture is more intelligent and convenient, and functional sofas are still in low penetration and high growth potential. Net profit for FY24/FY25 is expected to be HK$221/ 2.57 billion, +15.4%/16.4% year-on-year. The corresponding PE is 10X/8X respectively, maintaining the “buy” rating.
Risk warning: risk of raw material price increases; increased industry competition; store expansion falls short of expectations; real estate delivery falls short of expectations; risk of exchange rate fluctuations.