Introduction to this report:
The company is forging ahead, expanding overseas production capacity, transforming its own brand, and introducing key customers. It is expected that performance will be released quarterly, and the trend is clear.
Key points of investment:
Adjust profit expectations and maintain an “gain” rating. The company's 2023 performance was slightly higher than expected, and 24Q1 profit was slightly lower than expected. We adjusted the 2024-2025 profit forecast and added the 2026 profit forecast. The company's 2024-2026 EPS is 1.02/1.26/1.53 yuan (the original value in 2024-2025 was 1.14/1.26 yuan). Referring to the industry valuation level, the company was given 14.7 xPE in 2024, raised the target price to 14.9 yuan, and maintained the “increase” rating.
Order restoration and private label growth. 23Q4-24Q1's revenue increased by about 20%, respectively, with export customers ending inventory and demand recovery. Domestic brands are focusing on product, marketing, and channel collaboration. In 2023, the “Double Eleven” self-branded armchair product online omni-channel GMV was +256% year-on-year, and its own brand revenue in 2023 was 710 million, +66.6% year-on-year.
The deducted non-profit margin was basically the same. 24Q1's gross sales margin/ net sales margin was 22.1%/5.2%, -0.34pct/-2.3pct. The gross margin remained flat. The decline in net margin was mainly due to sales expenses of +0.92pct to 7.3%. The company increased its investment in marketing expenses in domestic e-commerce, cross-border e-commerce, and major US offline retail channels, providing sufficient paving the way for subsequent order growth. 24Q1 deducted non-net profit +21.60% year-on-year, which is basically in line with the increase in revenue.
The multi-dimensional expansion is worth looking forward to. 1) Customers. Adhere to the “number one number two” market strategy, and establish a mature overseas sales team to develop important channels and major customers such as Costco and Sam's.
2) Product. Accelerate the development of new products such as smart office chairs/lift tables/sofas. 3) Brand. Build brand mentality through global content marketing around “supporting” value anchors.
Risk warning: Prices of raw materials continue to rise, downstream consumer demand falls short of expectations, etc.