Key points of investment:

Conclusion: The company achieved revenue of 799 million yuan/ -14.2% for the full year of 2023, and net profit of 101 million yuan/ -23.2%. Among them, 2023Q4 achieved revenue of 221 million yuan/ +48.4%, and net profit of 20 million yuan/ -8.2% to mother. Considering the short-term pressure on the company's revenue and profit, the 2024-2025 EPS forecast was lowered to 1.23/1.53 yuan (originally 1.45/1.76 yuan), and the 2026 EPS forecast was added to 1.87 yuan. Referring to comparable company valuations, the company's target price was lowered to 23.4 yuan (originally 26.6 yuan) to maintain the “cautious increase” rating.

Revenue and profit are temporarily under pressure, but the trend is improving quarter by quarter. The revenue pressure was mainly due to weak overseas demand, and the willingness of major customers to replenish stocks was low, but along with the improvement in inventory conditions, revenue profit showed a marginal improvement. 2023Q1-Q4 achieved revenue of 2.07/1.79/1.92/221 billion yuan, respectively, or -18.6%/-41.3%/-13.8%/+48.4% year-on-year, respectively. 2023Q1-Q4 achieved net profit of 0.31/0.24/0.26/20 billion yuan, respectively, -8.0%/-45.5%/-18.5%/-8.2% year-on-year, respectively.

Gross margin increased significantly throughout the year, and increased management expenses dragged down profits. In 2023, the gross margin of the sports outdoor business increased by 2.9 pct, and the gross margin of the home lifestyle business increased by 3 pcts. The net interest rate for 2023Q4 was 9.1% /-5.6pct. The profit pressure was mainly dragged down by a sharp increase in management expenses and sales expenses. 2023Q4 management expenses were 20 million yuan/ +237.1%, mainly due to new investment in Shishi and Malay factories and plant consolidation and depreciation. 2023Q4 sales expenses were 0.02 billion yuan/ +63.4%.

Overseas demand continues to improve and is expected to grow steadily in 2024. Exports of furniture and parts increased 28.7% year-on-year in January-January 2024, and sales of existing homes in the US increased 9.5% month-on-month in February. Overseas inventory refills combined with marginal real estate recovery are expected to drive growth in sports, outdoor and household goods consumption.

Risk warning: Prices of raw materials fluctuate greatly; demand recovery from major overseas customers falls short of expectations.