The company released its 2023 annual report: full year revenue of 1,921 million yuan (+31.37%), net profit of 407 million yuan (YoY +21.93%), net profit of 356 million yuan (YoY +23.27%); single Q4 achieved revenue of 467 million yuan (YoY +32.00%), net profit to mother of 85 million yuan (+9.85% YoY), net profit of 75 million yuan (YoY +22.41%). Benefiting from overseas inventory optimization, the company's revenue continued to improve, and profitability was under slight pressure, mainly due to 1) a decrease in exchange earnings (-48 million yuan year over year), and 2) payment of equity incentives of 0.17 million yuan. After restoration, net profit returned to mother +27% year-on-year, of which +21% year-on-year after Q4 restoration.
New products are being iterated, and volume and price have risen sharply. The revenue for smart electric sofa/bed/accessories for the full year of 2023 was 1,426/2.87/187 million yuan, respectively (+46.3%/+5.0%/+2.8% year-on-year, respectively). In 2023, the sales volume of home retail stores across the US was -5.4%. With superior product strength and improved overseas supply & service capabilities, the company bucked the trend and raised the average price through product innovation. The sales volume of smart electric sofas in the core category was +39.1% year-on-year, and the average price was +5.2%. Looking forward to the future, under the trend of intensifying trade frictions and supply chain globalization, the company's Vietnam base has a first-mover advantage, and production efficiency continues to be optimized (net interest rate of the Vietnam base was +1.3 pct year on year, accounting for 79% of revenue), and the global market share is expected to continue to increase; the high-end brand MOTOLIVING shipped at the end of 23, which is expected to drive an increase in average prices. Furthermore, by the end of '23, the number of employees in the company reached 4,097, +49.6% year-on-year, actively expanding recruitment and showing confidence in growth.
With the number of old customers and the expansion of new customers, the “store-to-store” brand path is broad. The company's stickiness with old customers continued to increase. The transaction revenue of the top ten customers before 2023 ranged from +4.2% to +653.9% year-on-year (excluding one non-US customer), and 4 of these customers increased by more than 100%. In terms of new customer development, we received a total of 34 new customers throughout the year, of which 32 were retailers (mostly OBM businesses) and 5 were US TOP100 retailers. In 2023, the company's retail customers in the US accounted for 69.1% (+3.7 pct year on year), and US retailer customer revenue accounted for 56.1% of total revenue (+0.2 pct year on year). Looking forward to the future, the “store-to-store” model is expected to strongly occupy a wide range of retail channels and contribute to long-term growth momentum.
Gross margin improved steadily, and fluctuating expenses weighed on profits. In 2023, gross margin was 34.0% (+1.4pct year over year), net profit margin was 21.2% (y-1.6 pct year over year); single Q4 gross margin was 39.9% (+1.3 pct year over year), and net profit margin was 18.2% (-3.7 pct year over year). The company's average price increases, the efficiency of overseas bases continues to improve, and the profit center is expected to rise. In terms of cost performance, the cost rate for the 2023 period was 11.1% (+2.3 pct year on year), with sales/management/ R&D/finance expenses ratios of 2.9%/3.6%/6.1%/-1.6%, respectively, and -0.5/-0.5/+3.2pct year on year.
Stable cash flow and improved operating capacity. Net operating cash flow in 2023 was $530 million (+266 million yuan year on year), and Q4 was 109 million yuan (-65 million yuan year over year). In terms of operating capacity, the number of days receivable, payable, and inventory turnover as of 2023 was 40.87/53.63/78.16 days (-1.13/ -13.30/ -47.58 days year-on-year), and inventory turnover efficiency improved significantly.
Profit forecast: The company's net profit for 2024-2026 is expected to be RMB49,590 million, and 680 million yuan respectively. Corresponding PE valuations are 17.8X, 14.8X, and 12.9X, respectively, maintaining the “buy” rating.
Risk warning: The recovery in overseas demand fell short of expectations, the development of new models fell short of expectations, and raw materials and exchange rates fluctuated beyond expectations.