Incident: The company achieved revenue of 7.802 billion yuan in 2023, +2.00% year over year; net profit to mother of 324 million yuan, +393.89% year over year; net profit after deducting non-return to mother of 289 million yuan, +650.75% year over year. 2023Q4's revenue was 2.253 billion yuan, +0.57% YoY; net profit to mother was 180 million yuan, +193.83% YoY.
Channel sinking+integrated sales led to the same increase in revenue: on the revenue side, downstream demand was still under pressure, and revenue increased slightly in 2023Q4. Looking at the full year of 2023 by product, 1) The door and window hardware system achieved revenue of 3,587 billion yuan, an increase of 0.90%. The expansion of sinking channels hedged the decline in real estate demand and continued to consolidate its leading position in the door and window hardware market. 2) In terms of diversified home furnishing business, channel integration has achieved remarkable results. Household products/other building hardware/door and window accessories achieved revenue of 13.88/11.26/ 616 million yuan respectively, +1.42%/+20.29%/-3.55% compared with the same period last year. The company continues to implement an integrated strategy. Some new products, such as household bathroom, shower rooms, and ventilation systems, have been cultivated to achieve rapid revenue growth. With the gradual implementation of channel advantages and product integration advantages, it will help the company consolidate its leading position in the market and continuously enhance its core competitive advantage.
Costs declined and expenses were diluted, and Q4 profit improved significantly year-on-year: the gross profit margin was 32.26% in 2023, the price of mainly metal raw materials declined, and the average spot settlement price of LME copper/aluminum/zinc in 2023 was -4%/-17%/-24% year-on-year. The cost rate for the whole year decreased by 25.15% and 0.98 pct. Among them, sales/management/R&D expenses were 16.08%/5.05%/3.76%, respectively, -0.61 pct/+0.004 pct/+0.02pct. Sales expenses were further diluted as revenue scale increased; asset and credit impairment losses amounted to 136 million yuan, and the asset and credit impairment loss rate of 1.74% decreased by 0.46 pct. The net profit margin increased by 3.30pct to 4.15% in 2023, and profit flexibility was initially released. Net operating cash flow of 499 million yuan for the year decreased by 46.61%; revenue ratio of 108.3% yoy +8.6pct; payout ratio of 98.4% yoy +24.7pct.
When the bottom of demand is being repaired, performance flexibility is expected to continue to be unleashed: currently real estate is temporarily under pressure, and the company is actively exploring the market in an environment where demand is weak. On the one hand, it is developing new channels through the sinking market to take on decentralized demand, and on the other hand, increasing the amount of a single order through multi-category sales. At the same time, on the basis of declining costs and cost dilution, the company achieved a 46.51%/193.83% increase in performance in Q3/Q4. Since 2024, the real estate market is still in the process of recovering at the bottom. As the company continues to explore new channels and categories, revenue is expected to improve, leading to greater dilution of expenses and the release of flexible performance.
Investment advice: Recently, real estate-related policies have continued to show a positive attitude. Human efficiency is expected to rise steadily under the company's direct sales channels, and the company's multi-brand integrated industrial chain is expected to establish a new impetus for growth. We predict that the company's net profit for 2024-2026 will be 4.20/5.21/622 million yuan, a year-on-year growth rate of 29.76%/24.03%/19.20%, corresponding EPS of 1.31/1.62 /1.93 yuan/share, respectively. The closing price on March 27 corresponds to 2024-2026 PE 27.54x/22.20x/18.63x, respectively, maintaining the “gain” rating.
Risk warning: macroeconomic impact, expansion of new categories falling short of expectations, increased industry competition, etc.