The company released its 2023 annual report. In 2023, revenue of 1,524 million yuan was achieved, up 2.79% year on year; net profit to mother was 806 million yuan, up 2.97% year on year, after deducting non-net profit of 792 million yuan, up 3.93% year on year.

The diluted EPS was 1.08 yuan, the weighted average return on net assets was 13.62%, and the net operating cash flow was 629 million yuan, a year-on-year decrease of 42.94%. 2023 dividend plan: It is proposed to pay 6.80 yuan (tax included) for every 10 shares.

Brief review and investment advice.

1. Revenue increased 2.79% in 2023. Revenue in 2023 was 1,524 billion yuan, up 2.79% year on year, of which 4Q2023 fell 6.74% year on year.

Subregions: In 2023, the Chengdu region and other regions in Sichuan Province each accounted for 95.27% and 4.73% of revenue. Revenue increased 2.23% and 18.21% year-on-year respectively.

By product: Market leasing and service/marketing advertising and planning/contract management/decoration project revenue each accounted for 85.68%, 0.62%, 0.89%, and 8.06%, with year-on-year growth rates of 6.98%, 13.98%, 15.88%, and -7.41%.

2. In 2023, the consolidated gross margin increased by 1.21pct, and the main gross margin increased by 1.75pct. The comprehensive gross profit margin for the whole year was 70.18%, an increase of 1.21pct over the previous year. Among them, the gross profit margin of the main business was 71.06%, an increase of 1.75pct over the previous year, and the gross profit margin of other businesses was 52.56%, a decrease of 12.16 pcts over the previous year.

In the subregion, the gross profit margin of the Chengdu region was 73.06%, an increase of 1.82pct; in regions other than Chengdu, the gross profit margin was calculated to be 12.13%, a year-on-year decrease of 5.14 pcts. Gross margin by product, market leasing and service increased by 1.8 pct to 78.06%; gross margin of marketing advertising and planning decreased by 38.99 pct to -32.23%; gross margin of commissioned operation and management increased by 0.44 pct to 81.97%; and gross margin of decoration projects decreased by 4.78 pct to 3.38%. The final gross margin of the main business increased 1.75 percentage points to 71.06%.

3. The cost rate was reduced by 0.05 pct during 2023, of which the sales management fee rate was reduced by 0.03 pct. The cost rate for the 2023 period was 5.29%, a year-on-year decrease of 0.05pct. Among them, sales, management, and finance expense ratios were 0.51%, 4.85%, and -0.06%, respectively. The year-on-year changes were -0.08pct, 0.04pct, and -0.01pct, respectively.

4. Net profit to mother increased by 2.97% in 2023, and net profit after deducting non-return to mother increased by 3.93%. Total profit was 968 million yuan, up 2.59% year on year; the company confirmed investment income of 114 million yuan in 2023, an increase of 34.69 million yuan; asset impairment losses - 1.57 million yuan; effective tax rate decreased by 0.08 pct to 14.65%. The final net profit attributable to mother was 806 million yuan, up 2.97% year on year, after deducting non-net profit of 792 million yuan, up 3.93% year on year.

Maintain judgment on the company. ① As a leading home furnishing retail leader in the southwest, the company fully enjoys the dividends of population inflows, real estate policies and consumption recovery in the Chengdu region. ② While maintaining the steady development of the home furnishing store's main business, the company continues to explore new formats and models of home retail. Relying on a complete supply chain system, it empowers merchants to jointly build an ecosystem through shared platform resources. ③ The construction of the Tianfu project has been completed, and all efforts have been made to promote investment. Some brands and companies have already signed contracts. ④ The company has 1.1 million square meters of its own property, rich assets, and significant revaluation value; in recent years, it has continued to pay high dividends and positive returns to shareholders.

Update profit forecasts. Net profit due to mother in 2024-2026 is expected to be 872 million yuan, 922 million yuan, and 969 million yuan respectively, up 8.1%, 5.7%, and 5.1% year-on-year; the current market value corresponds to 2024-2026 PE 12 times, 11 times, and 10 times, respectively.

Referring to comparable company valuations, the 2024 PE is 14-16 times, corresponding to a reasonable market value range of 12.2 billion yuan to 14 billion yuan, and a reasonable value range of 16.31 to 18.64 yuan; this range corresponds to a 2023 PS of 7.6-8.7 times, giving an investment rating of “superior to the market”.

Risk warning. Real estate sentiment is declining; online channel shock; brand side and real estate side are being diverted; regional competition is intensifying.