Net profit due to mother in 2023 was still down 21.1% year over year, maintaining the buying rating

EasyHome released its annual report and quarterly report on April 25. In 2023, it achieved revenue of 13.51 billion yuan (yoy +4.1%) and net profit of 1.30 billion yuan (yoy -21.1%), lower than our previous forecast of 1.61 billion yuan, mainly due to the contraction of the weak real estate market and high-margin franchise expansion business. 24Q1's revenue fell 3.4% year on year to 3.14 billion yuan, and net profit to mother fell 22.9% year on year to 350 million yuan. Profit performance was significantly weaker than revenue, mainly due to a significant decrease in asset disposal income. We expect the company's net profit to be 1.40 billion yuan, 15.8 billion yuan, and 1.70 billion yuan respectively in 2024-2026 (value of 18.4 billion yuan and 1.99 billion yuan before 24-25, mainly due to shrinking store size and slowing franchise expansion). Compared with the company's 24 year wind unanimously expected the average PE value to be 17.4 times, giving the company 17 times PE in 24 years, with a target price of 3.74 yuan (previous value 4.94 yuan), maintaining the “buy” rating.

The real estate market is weak, and stores are further adjusted

In 2023, the company opened 3 new directly-managed stores and closed 2. The business format changed to 1 shopping center and 5 franchised stores. By the end of 23, the company had 86 directly managed stores, a net decrease of 5; 9 new franchised stores had been opened and 23 closed. By the end of 23, the company had 328 franchised stores, a net decrease of 9. Under the adjustment of stores in 2023, the company's revenue from leasing and franchise management business fell 11.8% year on year, and gross margin fell 11.4 pct year on year.

Dongwo's performance was steady, and GMV increased 173% year over year

Dongwo is the main gripper for the company to fully digitize and empower the industry. It is also a key layout to help the company get through the real estate post-market cycle. As of 2023, Dongwo has launched a total of 934 stores, up 173% year on year; more than 100,000 registered users, up 101% year on year; more than 25 million registered users, up 95% year on year; average monthly activity of 3.91 million, up 317% year on year; and achieved GMV of 97.4 billion yuan for the whole year, an increase of 173% year on year.

Wait for the negative effects of rent-free/rent-reduction to be eliminated

During the 22-year period, due to macroeconomic disturbances, the company mainly reduced rents for some merchants and continued to exempt some merchants from part of their rents in 2023. In 2024, with the gradual recovery of the real estate market and the re-signing of merchant leases, the company's rental income is expected to pick up.

Risk warning: macroeconomic recovery falls short of expectations, implementation of real estate policies falls short of expectations, and the company's digital upgrade falls short of expectations.