Incident: The company released the 2023 performance report: In 2023, the company achieved revenue of 3,642 billion yuan (+2.5% YoY), net profit to mother of 294 million yuan (+6.3% YoY), and net profit of 218 million yuan (+14.1% YoY). 2023Q4 achieved revenue of 1,095 million yuan (+2.9% YoY), net profit attributable to mother of 128 million yuan (+14.0% YoY), and net profit of non-return to mother of 109 million yuan (+14.2% YoY).
The retail side of the company operates smoothly, with strict risk control, revenue performance under pressure, and steady expansion of overseas business; profit-side results in cost reduction and efficiency improvement have been shown, and profit performance is excellent. In addition, the company used its own funds to buy back, with a total amount of 30-60 million yuan.
Retail sales are stable, bulk pressure is under pressure, and overseas expansion is steady. 1) Retail: The company continues to promote the diversified layout of categories, deepens the synergy effect in the wood category of kitchen cabinets, and actively promotes the layout of platform branches and offices to accelerate the continuation of channel decline. In addition, the company actively lays out the stock market and is expected to continue to contribute to growth by broadening the entry point for government reform business through cooperative home repair and home improvement companies. 2) Bulk: The company increases the expansion of high-quality central state-owned enterprises and strictly controls customer risks through agency operations. The channel strategy is conservative, and the expected growth rate is under pressure under high base. 3) Overseas: The company has adopted a differentiated market strategy for North America, Australia and Southeast Asia, and the management team has been adjusted, and overseas revenue growth is expected to continue to be steady. 4) Assembly: The company deepens cooperation with leading home improvement companies, and is also strengthening the bag channel. It is expected that the number of packages will continue to increase.
The results of reducing costs and increasing efficiency have been shown, and cash flow has picked up. In 2023, the company's net profit margin was 8.1% (+0.3 pct compared to the previous year). The company actively promoted supply chain optimization, built the core digital intelligence of digital R&D, supply and marketing around technological innovation and development strategies, raised the level of flexible production, and showed results in cost reduction and efficiency. In addition, the company's net operating cash flow in 2023 was 619 million yuan (+150.7% YoY), mainly benefiting from order growth and further optimization of inventory and supplier procurement management.
Profit forecasting and investment rating: The company has strengthened management empowerment and retail transformation. Channels and categories are still expanding, and overall development is accelerating. We expect net profit to be 3.4/370 million yuan in 2024-2025, corresponding to PE of 8.1X/7.0X, respectively, to maintain a “buy” rating.
Risk warning: The recovery in offline consumption fell short of expectations, real estate declined beyond expectations, and industry competition intensified.