Incidents:

The company announced the 2024 quarterly report forecast. It is expected to achieve revenue of 1,985 billion yuan to 2.116 billion yuan, an increase of 10.00% to 20.00% over the previous year, net profit to mother of 157 million yuan to 188 million yuan, an increase of 50.00% to 80.00% over the previous year, and basic earnings per share of 0.16 yuan to 0.20 yuan.

Comment:

First-quarter results achieved significant growth. Continued cost reduction and efficiency increased profitability due to the low base for the same period last year, and the postponement of the Spring Festival this year compared to last year. Production orders were sufficient compared to last year, and the company's performance achieved good growth. Meanwhile, in the first quarter of this year, the growth rate of the company's complete channel and sub-brand Milana remained strong, leading to continued growth in revenue. The company introduced an IPD system to achieve matrix-type organizational transformation and implementation, and comprehensively improve the company's overall operational efficiency. Based on the company's quarterly report forecast data, the expected net interest rate range is 7.23% to 9.46%, up 1.46pct., from the first quarter of last year to 3.69pct.

This year, the company will accelerate the offline channel layout and deepen the cooperation model with construction companies. In 2023, the company's core brand Sophia will drive customer unit price/number of customers +6.30%/+4.63%, and the overall revenue +10.96% was 10.552 billion yuan; the sub-brand Milana achieved revenue of 472 million yuan, +47.24% year over year, and the number of stores exceeded 500; Simi brand stores promoted the transformation of the entire model. In 2024, store opening will be accelerated through multiple brands and omnichannel to lay out an empty market. Store expansion will be an important development step this year. In terms of assembly channels, in 2023, the number of cooperative assembly companies reached 221, covering 185 cities and regions across the country. At this stage, dealers are actively developing local assembly enterprises and promoting the expansion of sinking channels. The company will continue to adhere to the business model of simultaneous development of dealer assembly and direct assembly. In the future, the entire assembly channel will be laid out through multiple brands and all categories.

Investment advice

The company's multi-category, multi-brand, and omni-channel integrated development and management strategy is beginning to show results, and high-quality development can be expected in the medium to long term. We maintain the 24-26 EPS forecast of 1.50 yuan/1.71 yuan/1.92 yuan, corresponding to the 24-year PE of 11 times, maintaining the “gain” rating.

Risk warning

Market competition increases risks, multi-brand strategy implementation falls short of expectations, and the risk of rising raw material prices.