Event: The company publishes its 2023 annual report. The company's revenue in 2023 was 3.02 billion yuan, +21.6% year on year; net profit to mother was 634 million yuan, +189.7% year on year; net profit from non-return mother was 2.52 billion yuan, +142.4% year on year; single Q4 revenue was 1.22 billion yuan, +36% year over year, with deduction of 99 million yuan from non-return mother, +160.6% year over year, exceeding the forecast limit.
The growth rate of the smart home business is picking up, and brand advantages are highlighted. The company's furniture manufacturing business revenue was 2.95 billion yuan, +8.6% year on year, and core linear drive products accounted for 68.8%, +10.8 pct year on year. By channel, 1) Cross-border e-commerce revenue was 1.772 billion yuan, up about 12.6%, of which Amazon's revenue was 1.02 billion yuan, +7.8% year on year, and independent website revenue was 671 million yuan, +16.7% year on year. The company's brand influence continued to increase; 2) ODM and international business revenue was 884 million yuan, up 2.3%, and the growth rate picked up; 3) domestic business revenue was 304 million yuan, +5.1% year on year. The overall gross profit margin of the home furnishing business was 44.2%, +4.2pct. It is expected to be mainly driven by declining shipping costs, optimization of exchange rate trends, and the company's inventory clearance.
The overseas warehouse business is developing rapidly, and production capacity expansion is progressing steadily. In 2023, the company's overseas warehouse business revenue was 951 million yuan, an increase of 94% over the same period, exceeding expectations. The gross profit margin was 12.7%, +9.3 pct compared to the previous year. It was mainly due to the rapid increase in storage utilization rate after the company expanded customers and the scale effect of procurement after increasing the volume of goods.
In terms of storage area, the company's storage area at the end of '23 was 289,600 square meters. The average revenue per unit area was +85% compared to the same period, and storage utilization efficiency improved markedly. The company plans to expand the new production capacity by 10-15 thousand square meters in 2024. It has expanded to 362,000 square meters in the first quarter, an increase of 73,000 square meters over the previous quarter. The production capacity plan has been successfully implemented, which is expected to continue to drive business growth.
Profitability has improved significantly and cash flow has been greatly optimized. In 2023, the company withheld a non-net interest rate of 6.46%, +3.2pct year-on-year, generating operating cash flow of 820 million yuan, or 144% year-on-year. The company plans to pay a dividend of 0.4 yuan per share in 2023, with a dividend payment rate of 19.7%.
Investment advice: The company's main smart home business is growing steadily, and the overseas warehouse business is driving rapid development. At the same time, it also includes the logic of increasing gross margin under scale effects, and is optimistic that the company's performance will continue to grow. We expect the company to achieve operating income of 50.26/60.49/7.148 billion yuan and net profit to mother of 449/5.42/630 billion yuan in 2024-2026. Currently, the corresponding PE is 13.87/11.48/9.89 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: Overseas warehouse construction falls short of expectations; overseas consumer demand declines; shipping costs and exchange rates fluctuate greatly