The company released the 2023 Annual Report & 2024 Quarterly Report: 1) 2023: Annual revenue of 8.195 billion yuan (YoY +25.8%), net profit of 263 million yuan (YoY -26.6%); single Q4 realized revenue of 2,419 billion yuan (+28.3% YoY), net profit attributable to mother -103 million yuan (-269.6% YoY); 2) 2024Q1: Achieved revenue of 2.34 billion yuan (+39.0% YoY) and net profit of 103 million yuan (YoY +31.2%). Benefiting from the explosive growth of cross-border e-commerce & merger with Yongyu, the revenue side showed impressive performance; apparent profit pressure was mainly due to concentrated asset & credit impairment in Q4, and profit performance was excellent after restoration. Furthermore, after overseas inventory was optimized, OEM was steadily repaired, compounded by continued high growth in cross-border e-commerce, and 24Q1 revenue & profit increased at the same time.
Cross-border e-commerce: Online revenue in '23 reached 1,621 billion yuan (+60.5% year over year), and gross margin was 28.4% (+3.3 pct year over year). The high growth is mainly due to the company's cross-border industrial chain layout, clear cost advantages, continuous model iteration, and smooth expansion of new platforms and categories. Due to the long VC account period and the expected gradual decline in Amazon's share, the explosive growth of multiple platforms such as Tiktok and Temu (the company ranked first in TikTok sales in the household category in '23) is expected to complement the increase, and the high growth is expected to continue in the future.
OEM: Overall pressure is expected to remain in '23, but benefiting from overseas inventory optimization, it is expected to gradually pick up from 23H2; orders for non-Ikea office chairs & sofas were full in 24Q1 and grew steadily under a low base. Among them, office chairs are expected to grow faster, and 24Q2 is expected to continue the growth trend.
LO (Overall Office Solution): Revenue for 23 years was 1,077 billion yuan (+27.9% YoY), and gross margin was 30.89% (+0.8pct year over year). Outstanding performance was mainly due to headquarters empowerment & management optimization to actively explore new customers to seize share. Slight growth is expected to continue in 24Q1, and overall operations are stable.
Yongyu (New Material Flooring): Revenue in '23 was 1,490 million yuan, and contributed 228 million yuan in revenue after merger in November '22. The growth rate was impressive; according to our estimates, 23H2 grew 46% year-on-year. Benefiting from pattern optimization & rising production capacity for 24 years, it is expected to achieve steady growth.
Dr. Chef: Revenue in '23 was 658 million yuan (-26.7% YoY). The pressure was mainly due to the decline in industry sentiment. The pressure is expected to remain in '24.
Gross margin continued to recover, and apparent net profit was under pressure. In 2023, gross margin was 23.8% (+2.0pct year over year), net return margin was 3.2% (-2.1pct); 23Q4 gross margin was 23.1% (+3.2pct year over year), net profit margin was -4.3% (y-7.3pct year over year); 24Q1 gross margin was 24.8% (-0.1pct year over year), and net return margin was 4.4% (y-0.3 pct year over year). The company implemented cost reduction and efficiency, and refined management, combined with an increase in the share of high gross profit lines, and stable gross margin performance; the pressure on Q4 net margin was mainly due to centralized calculation of depreciation. In terms of cost performance, the cost rate for the 2023 period was 16.4% (+0.7pct year on year), with sales/R&D/management/finance expenses ratios of 8.2%/2.7%/5.1%/0.3% (+0.4/-0.3/+0.2/+0.4pct, respectively).
Cash flow & operating capacity performance is stable. Net operating cash flows for 2023/24Q1 were $447/158 million (year-on-year, respectively); in terms of operating capacity, as of the end of 2023, the number of days receivable/payable/inventory turnover was 55.11/84.14/101.59 days (+8.12/-3.51/-18.59 days), respectively.
Profit forecast: The company's net profit for 2024-2026 is expected to be 5.5 billion yuan, 6.5 million yuan, and 770 million yuan, respectively. The corresponding PE valuations are 11.0X, 9.2X, and 7.8X, respectively, maintaining the “buy” rating.
Risk warning: Cross-border e-commerce platform risks, increased competition, raw materials & exchange rates fluctuate beyond expectations.