Performance ushered in an upward inflection point, and sales in new scenarios continued to gain strength

The company released its 23rd annual report, achieving operating income of 7.802 billion yuan, +2.0% year over year, and net profit to mother of 324 million yuan, +393.89% year over year, in line with expectations disclosed in previous performance forecasts. Looking at the single quarter, 23Q4 revenue and net profit attributable to mother were 22.53 billion yuan and 180 million yuan respectively, +0.6% and +193.6% year-on-year respectively. Performance has shown a trend of improving quarterly. Looking ahead to 24 years, we believe that the company will continue to promote category expansion and channel decline, explore markets such as schools and hospitals to gain growth, and the quality of operations is expected to improve. If the real estate boom picks up in the future, the company's performance is expected to continue to exceed expectations.

The gross margin of door and window hardware has improved markedly. Looking at the continuous volume of other construction hardware products by business, the company's core single product, door and window hardware, achieved revenue of 3.59 billion yuan in '23, +0.9% year-on-year, and gross margin +3.95pct to 40.4% year-on-year, and profitability improved markedly. In addition, traditional door and window components/point support glass curtain wall components/door control hardware/stainless steel fence components achieved revenue of 6.2/4.0/4.1/20 billion yuan respectively, -3.6%/-6.4%/-17.1% year-on-year, and gross margins of 18.3%/28.1%/38.6%/22.3%, respectively, +3.7/+1.7/+2.0pct. Household products/other construction hardware revenue was 13.9/1.13 billion yuan, +1.4%/+20.3% year-on-year, and gross margin was -1.8/+1.8pct year-on-year to 29.8%/19.0%, respectively. It led to a 2.06 pct increase in annual comprehensive gross margin to 32.3%.

Raw material prices continue to decline, or drive continuous improvement in profitability. From the perspective of raw materials, the zinc alloy/aluminum alloy/stainless steel prices we track were -13.3%/-2.0%/-18.4% year-on-year, respectively, +1.2%/+0.8%/-6.7% month-on-month, respectively. We judge that the decline in raw material prices or the year-on-year improvement in profitability in the fourth quarter was driven by a year-on-year improvement. In 24Q1, the prices of the above raw materials were -9.7%/+0.7%/-17.5% year-on-year, respectively. We determine that with the continuous decline in raw material costs, gross margin still has a lot of room for improvement. The cost ratio for the 23-year period was -0.98 pct to 25.15% year on year, and the sales/management/finance/R&D expense ratio was -0.6/+0.004/+0.02/-0.4 pct year on year, respectively. Under the combined influence, the net interest rate was +3.35pct to 4.49% year over year.

Build a digital online platform and continue to gain strength through channels

In terms of channels, as of '23, the company had more than 1,000 domestic and international sales network points and a sales team of more than 6,000 people. At the same time, it continued to make efforts in the online and digital direction, developing the “Jianlang Yuncai” platform for B-side customers, and building a new pan-home online platform “Home Beauty” for C-end users.

In terms of subsidiaries, Jianyijia/Haybase/Precision Manufacturing's revenue for 23 years was 2.8/36/450 million yuan, respectively, -9.8%/-7.0%/+27.5% year-on-year, and net profit was 0.05/0.6/60 million yuan, respectively, which turned the year-on-year loss into profit/ -36%/+37%, respectively.

Expect marginal improvements and maintain “buy” ratings

Considering that the company's 23-year performance fell short of our previous expectations, we slightly lowered our 24-25 net profit forecast to 430,000 and 520 million yuan and added a 26-year forecast of 640 million yuan (the value was 405/52 million yuan 24-25 years ago), +31.9%, +22.4%, and +21.5% year-on-year respectively, maintaining a “buy” rating.

Risk warning: Channel expansion falls short of expectations, raw material prices have risen sharply, industry competition has intensified, and the decline in real estate chain prosperity has exceeded expectations.