Core views:
Sophia publishes its annual report for the year 23. The company achieved revenue of 11.666 billion yuan, +3.95% year over year; net profit to mother of 1,261 billion yuan, +18.51% year over year; net profit after deducting non-return to mother of 1,135 billion yuan, +21.06% year over year. 23Q4 revenue was $3.465 billion, +5.37% year over year; net profit to mother was 309 million yuan, +18.40% year over year; net profit after deducting non-net profit of 229 million yuan, +22.82% year over year. The company's cash dividend ratio in '23 was as high as 75.5%. The dividend rate was significantly higher than last year, and the dividend ratio reached 6.3%.
Revenue has grown steadily, the overall strategic model has been upgraded, and category expansion has achieved remarkable results. The company continues to promote the strategic layout of large households, and the growth rate of complete channels, Milana brands, and ancillary products is remarkable. By channel: (1) Complete channel revenue increased 67.52% year-on-year in '23. By the end of '23, the company had cooperated with 221 construction companies, covering 185 cities and regions across the country. (2) Optimize the bulk business customer structure, keep the revenue contribution of high-quality customers stable, and continue to lay out overseas markets. By brand: (1) In '23, Milana achieved revenue of 472 million yuan, +47.2% year on year, and the average customer unit price on the factory side was 13,934 yuan, +6.6% year over year. Among them, Q4 revenue was 152 million yuan, +22.6% year-on-year, and operating stores covered more than 95% of the country's prefecture-level cities. (2) In '23, Sophia achieved revenue of 10.552 billion yuan, +11.0% year-on-year; the average customer unit price on the factory side was 19619 yuan, +6.3% year-on-year. 23Q4 revenue was $3.156 billion, +15.2% YoY. The main brand grew steadily, package upgrades increased customer unit prices, and the overall strategy upgraded. Sophia brand cabinet and wooden door revenue growth rates were 294% and 47%.
Expense control has been effective, and profitability has rebounded markedly. (1) Sales/management/R&D/finance expense ratios for 23 years were 9.7%/6.6%/3.5%/0.5%, respectively, -0.3/-0.2/+0.4/-0.2pct year-on-year, respectively. Expense control was effective. (2) The gross margin/net margin for '23 was 36.15%/11.34%, respectively, +3.2/+1.8pct year-on-year, respectively. The company reduced costs and increased efficiency, strictly controlled costs and reduced raw material prices.
In '23, the company calculated impairment losses of 310 million yuan. Excluding impairment effects, profitability rebounded markedly.
Profit forecasting and investment advice. The company's net profit for 24-26 is expected to be 15/17/1.8 billion yuan, up 17%/12%/11% year on year. The company operates steadily and has a high dividend ratio. The judgment on the company's reasonable value of 21.31 yuan/share is maintained, corresponding to the 24-year PE valuation 14 times, maintaining a “buy” rating.
Risk warning. Real estate sales fell short of expectations, demand recovery fell short of expectations; raw material prices rose.