Incident: The company announced that it had achieved revenue of 1,094 million yuan, a decrease of 0.18% for the full year of 2023; achieved net profit of -48 million yuan, net profit of non-return to mother -77 million yuan, and the loss narrowed year-on-year. The company's distributable profit in 2023 is 61 million yuan, and the planned cash dividend is 0.2 yuan/share. The dividend rate corresponding to the closing price on April 25 is 3.0%.
The revenue structure continues to be adjusted, and the decoration engineering business is dragging down profits. By business, the company's design/upholstery/decoration engineering business achieved operating income of 68/225/208 million yuan, respectively, with year-on-year changes of 9.97%/43.76%/-38.68%, and gross margins of 47.90%/32.47%/-73.58%, respectively, with year-on-year changes of 0.36pct/5.05pct/-49.35pct, respectively. While the soft decoration business grew rapidly in 2023, the scale of the decoration engineering business contracted, while the design business accounted for 60.14% of revenue, a year-on-year increase of 5.55pct, and the revenue structure continued to be adjusted. The company continued to expand soft decoration services using the design business as a starting point, further highlighting the importance of the company's design+soft decoration business.
Soft goods orders continue to be reserved, and share buybacks demonstrate sustainable development. In 2023, the company signed a total of 1,625 billion yuan, a decrease of 14.6%. Of these, design/software/engineering projects achieved new signings of 9.68/3.32/325 million yuan respectively, with year-on-year changes of -20.2%/49.7%/-30.4% respectively. The company continues to strengthen the soft decoration team building, coordinate and cooperate with the company's advantages in design and rich supply chain system, and the soft decoration business has achieved rapid development. As ongoing projects advance, order reserves are expected to continue to be converted into revenue, driving the company's scale up. On February 7, 2024, the company announced a share repurchase to implement an equity incentive plan or employee stock ownership plan. It is estimated that it plans to repurchase a total of about 372.02-7.444 million shares at a price not exceeding 13.44 yuan/share (inclusive), accounting for about 1.37%-2.73% of the company's current total share capital. The first repurchase was completed on February 20. The share buyback shows the company's confidence in long-term development. Continued business transformation is expected to drive continuous improvement in profits in the future.
Investment advice: We expect the company to achieve operating income of 1,122/12.16/1,344 billion yuan and net profit to mother of 0.56/0.93/132 million yuan in 2024-2026. The closing price on April 25 was 32.58/19.67/13.90 times PE, respectively, maintaining the “gain” rating.
Risk warning: New business development falls short of expectations, new orders fall short of expectations, macroeconomic downside risks.