A quick performance report was released. Net profit attributable to mother increased 13.97% in 23Q4, maintaining the “increase in holdings” rating

The company released the 2023 performance report. The company's revenue also increased 2.50% to 3.642 billion yuan in 23, and net profit to mother also increased 6.29% to 294 million yuan, slightly lower than our previous expectations (312 million yuan). We judge that this is mainly due to a slight recovery in terminal demand. Among them, 23Q4's single quarter revenue increased by 2.86% to 1.09 billion yuan, and net profit to mother also increased by 13.97% to $128 million. Profit performance was superior to revenue, mainly due to the company's increased cost reduction and efficiency and cost control. Considering that demand still needs to recover further, we lowered our revenue forecast slightly. We expect net profit to be 3.38/386 million yuan respectively in 24-25 years (3.60/412 million yuan in 24-25 years ago), and the corresponding EPS is 2.19/2.50 yuan, respectively. Referring to the company's 24-year Wind, the average PE value is 9 times higher. Considering that the company's channel changes drive the improvement of operating capacity, while laying out overseas markets earlier and there is sufficient potential for overall channel growth, giving the company 12 times PE in 24 years, with a target price of 26.28 yuan (The previous value was 34.34 yuan), maintaining the “gain” rating.

Promoting channel transformation, stable retail performance, and steady development of overseas business. Against the backdrop of weak terminal demand recovery in 23 years, the company firmly revolved around the household development strategy, accelerated channel transformation and decline, strengthened retail channel construction, and promoted rapid development of the assembly business. We expect retail business revenue to maintain steady growth throughout '23. Among them, the assembly business deepened cooperation with leading equipment companies, and we expect complete revenue to continue to increase rapidly; in terms of engineering, the company strengthened risk management, and 23Q1-3 bulk business revenue fell 3.7% to 884 million yuan. We expect revenue for the full year of 23 The scale also remained stable; on the overseas side, the company pioneered overseas markets earlier, and 23Q1-3 revenue also increased 19.5% to 200 million yuan. We expect overseas revenue to continue to grow steadily throughout the year 23.

Cost-leading strategies are showing results, driving increased profitability

Judging from the financial performance for the full year of 23 and 23Q4, the company's net profit growth rate was clearly superior to operating income. The main factors were: 1) the company further deepened technological innovation and cost leading strategies, built the core digital intelligence and cost power of digital R&D, production, supply and marketing, raised the company's level of intelligent and flexible manufacturing, and the results of cost reduction and efficiency measures were increasingly evident; 2) the company continued to optimize the supply chain to improve supply chain management efficiency, and raw material procurement costs decreased. Results of cost reduction and efficiency have been shown, leading to an increase in overall profitability.

Favorable real estate policies continue to be released, and demand is expected to recover further

According to data from the Bureau of Statistics, retail sales of furniture increased 2.3% to 16.5 billion yuan in December '23, and retail sales of furniture increased by 2.8% to 151.6 billion yuan in January-December, indicating that terminal consumer demand still needs to recover further. Meanwhile, favorable real estate policies in some cities have continued to be released recently. We expect more cities to better implement optimized real estate policies and stabilize residents' demand for housing purchases, which is expected to benefit the valuation repair of the real estate chain. The company continues to promote changes in domestic channels and actively explore overseas markets. It is expected to benefit from the release of real estate policies & recovery in demand, and maintain the “gain” rating.

Risk warning: Demand recovery falls short of expectations, real estate sales are declining, and channel expansion falls short of expectations.