The company released the 2023 Annual Report & 2024 Quarterly Report: 1) 2023: Achieved revenue of 3,538 billion yuan (YoY -12.8%), net profit of 298 million yuan (YoY -11.1%), net profit after deducting non-attributable net profit of 209 million yuan (YoY -13.8%); Single Q4 realized revenue of 1,038 million yuan (+19.7% YoY), net profit attributable to mother of 87 million yuan (YoY +72.4%). 2) 2024Q1: Achieved revenue of 857 million yuan (+23.0% YoY), net profit attributable to mother of 43 million yuan (YoY -17.5%), net profit of non-attributable net profit of 43 million yuan (+21.60% YoY). Along with overseas inventory optimization and the expansion of the company's products & channels, revenue is expected to accelerate in 24Q2; 23Q4 non-policy relocation and disposal revenue contributed 91 million yuan in pre-tax profit, and the slight pressure on profit after exclusion was mainly due to new business expansion and increased expenses.
The bottom of the office chair warms up, and the sofa is temporarily pressurized. The revenue for office chairs/sofases/massage chair body/leisure chairs in 2023 was 25.58/5.37/2.37/0.29 billion yuan respectively (-7.9%/-34.4%/-32.2%/-18.0% year-on-year, respectively). Inventory optimization for export customers combined with domestic brand volume is expected. Office chair H2 is expected to rectify. Benefiting from the continuous improvement of overseas base climbing & orders, it is expected to grow steadily in 24 years. The pressure on sofas is expected to be mainly due to the slow departure of core customers, but as the company actively develops new customers & new regions (important new customers such as Costco and Sam's have gradually shipped), the growth rate is expected to accelerate in 24 years. In addition, the company has been developing a new category of lift tables in 23 years and has successfully entered the supply chain of large retailer customers in mainstream global markets, and is expected to continue to grow rapidly in the future.
Multiple factors drive export sales growth, and domestic independent brands have performed brilliantly. Domestic and export sales revenue in 2023 was 892/2,635 million yuan respectively (+7.91%/-17.88% year over year), and single H2 +38.5%/+0.9% year over year respectively. In terms of export sales, the company frequently participated in exhibitions, visited customers, recommended new products, and introduced a mature overseas sales team to successfully expand many large retail customers such as Costco and Sam; Romania's 23H1 was put into operation, the Vietnam base continued to expand & improve efficiency, and it has entered many new categories & new customers & new businesses, and the global supply share continues to increase. In terms of domestic sales, 23 was the first year of the company's independent brand. During the “Double Eleven” period, online omni-channel GMV was +256% compared to the same period, ranking second, third, and second in the Tmall, JD, and Douyin industries respectively. Furthermore, the number of offline engineering channel customers and major direct management customers has further increased, and retail channel construction is being promoted at an accelerated pace, which is expected to continue to increase in the future.
Production efficiency continues to improve, and increased costs suppress profits in the short term. The gross margin for 2023 was 22.9% (+3.5pct year over year), and the net profit margin was 8.4% (yoy +0.2pct); the gross margin for single Q4 was 22.4% (+1.1 pct year over year), the net margin to mother was 8.4% (+2.6 pct year over year); 24Q1 gross margin was 22.1% (-0.3 pct year over year), and the net profit margin to mother was 5.0% (yoy -2.4pct).
In terms of cost performance, the cost rate for the 2023 period was 15.7% (+4.1pct year on year), with sales/management/R&D/finance expenses ratios +3.8/+1.5/-0.5/-0.8 pct year on year, respectively. The company insisted on lean manufacturing and cost optimization, and gross margin continued to improve (the unit cost of office chairs/sofas was -4.5%/-6.2% year-on-year, respectively). The net profit pressure in Q4 was mainly due to increased investment in independent brands & partial management expenses; 24Q1 apparent profit pressure was mainly due to misplaced government subsidies (23Q1 government subsidies contributed 0.18 million yuan).
Looking forward to the future, the profit center is expected to increase steadily as the advantages of scale appear.
Stable cash flow and excellent operating capacity. Net operating cash flow in 2023 was 324 million yuan (YoY -415 million yuan), Q4 was 68 million yuan (YoY -74 million yuan), and 2024Q1 was -46 million yuan (YoY -86 million yuan). In terms of operating capacity, as of 2024Q1, the number of days receivable, payable, and inventory turnover was 55.72/71.60/55.19 days, respectively, +7.12/-0.67/-9.00 days compared to the previous year.
Profit forecast: The company's net profit due to mother for 2024-2026 is expected to be RMB 3.3, 4.1 million, and 490 million yuan, respectively, and the corresponding PE valuations are 13.0X, 10.4X, and 8.7X, respectively.
Risk warning: The recovery in overseas demand fell short of expectations, raw materials and exchange rates fluctuated beyond expectations, and domestic competition intensified.