Revenue and net profit to mother were basically the same year on year. In 24Q1, -12% and -49%, Rollei Life released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 5.315 billion yuan, a year-on-year increase of 0.03%, net profit of 572 million yuan, a year-on-year decrease of 1.44%, after deducting non-net profit of 515 million yuan, a year-on-year decrease of 3.71%. The performance was lower than expected; EPS was 0.68 yuan, and plans to pay a cash dividend of 0.40 yuan per share and a dividend rate of not less than 0.20 yuan per share in the 24th mid-year report.
On a quarterly basis (before adjustment), 23Q1-Q4 companies' revenue in a single quarter was -3.62%, +11.02%, -2.81%, and -2.20%, respectively, and net profit to mother was +11.13%, +69.26%, -22.19%, and -13.90%, respectively.
In terms of the first quarterly report, 24Q1 achieved revenue of 1,088 billion yuan, a year-on-year decrease of 12.26%, and net profit to mother of 89.49 million yuan, a year-on-year decline of 49.47%. The large decline in performance was mainly due to the decline in profits of overseas subsidiaries (US furniture business) and a year-on-year decrease in government subsidies and investment income.
The main home textile industry's online/direct/franchise revenue in 23 years was +9%/+32%/-4%. Looking at the revenue by channel, the company's home textile business and furniture (LEXINGTON, US) accounted for 80% and 20% of revenue respectively in '23, +3.37% and -11.61%, respectively; of these, the main home textile industry's online, direct management, franchise, and other channel revenue accounted for 30%, 8%, 34% of the company's total revenue, respectively. Revenue was +8.65%, +31.68%, -3.91%, -3.91%, respectively. At 2.96%, direct sales and online channels maintained a relatively ideal growth rate. By category, standard kits, quilts, pillows, and summer products accounted for 31%, 35%, 5%, and 3% of revenue, respectively. Revenue was +3.06%, +8.59%, -6.99%, and +10.49%, respectively.
In terms of stores, the total number of company stores at the end of '23 was 2,730, 432 were newly opened, and 364 were closed, a net increase of 68, an increase of 2.55%. Among them, there were 335 direct-run and 2,395 stores, respectively, with net increases of 9.12% and 1.70%, respectively. In terms of endogenous store efficiency, the average revenue of directly-managed stores that have been in business for 12 months or more increased by 30.05% year-on-year.
The 23-year expense ratio increased the gross profit margin, reduced inventory, and a significant increase in net operating cash flow. The gross margin increased by 1.31 PCT to 47.27% year-on-year in '23. The gross margins of online, direct management, franchise, and others in the home textile industry were 52.21% (+1.68PCT), 67.25% (+0.70PCT), 47.42% (+0.72PCT), and 42.29% (+5.14PCT), respectively; the gross margin of the US furniture business was 33.83%, down 3.40PCT year on year. On a quarterly basis, gross margins for the single quarter from 23Q1 to 24Q1 were +2.17, +1.94, +1.86, -0.31, and -0.47PCT, respectively.
Expense rate: The cost ratio increased by 2.45 PCT to 32.31% year over year, with sales, management, R&D, and finance expenses rates of 24.70% (+3.24PCT), 5.95% (-0.78PCT), 2.10% (-0.02PCT), and -0.43% (+0.01PCT), respectively. On a quarterly basis, the cost rates for a single quarter from 23Q1 to 24Q1 were -0.23, +0.67, +5.07, +3.40, and +5.75PCT, respectively. Among them, 24Q1 sales, management, R&D, and financial expenses rates were +4.28, +1.42, +0.16, and -0.11PCT, respectively.
Other financial indicators: 1) Inventory decreased by 17.87% year on year to 1,344 billion yuan at the end of March '24, down 3.55% from the beginning of the year. Inventory turnover days in 23 and 24Q1 were 191 days, 194 days, +7 days year on year, and -14 days, respectively. 2) Accounts receivable decreased by 21.43% year on year to 463 million yuan at the end of March '24, down 31.00% from the beginning of the year. The number of accounts receivable turnover days in 23 and 24Q1 was 36 days, 32 days, flat year on year and 6 days, respectively. 3) Net operating cash flow was 936 million yuan in 23 years, up 116.73% year on year, and decreased by 42.97% year on year in 24Q1.
The main home textile business grew steadily in '23, and we expect disturbances to be eliminated and performance repaired in '23, the company's main home textile business revenue grew steadily by 3%, and gross margin increased. The decline in sales and gross margin in the US furniture business dragged down the overall performance. In terms of the domestic home textile business, the company continues to consolidate its leading position in the home textile industry and continues to promote channel expansion. While consolidating and expanding its channel advantages in the first-tier and second-tier markets, it actively penetrates and radiates into the third- and fourth-tier markets. Direct management and franchise have achieved net expansion of epitaxial stores in 23 years, and the efficiency of direct-run stores has also improved markedly. At the same time, the company deepened cooperation with traditional e-commerce platforms and continued to deploy short video platforms such as Douyin. During the “618” and “Double 11” promotions in '23, the main brand Rollei Life ranked first in GMV, and GMV in a single store at Rollei Guanqi on Tmall ranked first.
We continue to be optimistic as a leader in home textiles. In 24 years, the company continued to expand channels, improve operational capabilities, and strengthen brand building to steadily increase market share; the drag of US subsidiaries was gradually eliminated, and performance returned to a normal growth trajectory. In addition, the company's dividend rate is high. At the end of '23, when the proposed dividend amount is added to the mid-year report for 24, the dividend rate will not be less than 6.3% (calculated based on the closing price of April 26).
Considering the uncertainty of domestic and foreign consumer demand trends, we lowered the company's 24-25 profit forecast (net profit reduced by 24%/24% from the previous profit forecast, respectively) and added a profit forecast for 26 years, corresponding to EPS of 0.76, 0.89, and 1.01 yuan respectively for 24-26, and PE of 12 times and 11 times for 24 and 25, respectively, taking into account the company's high dividend attributes and maintaining the “buy” rating.
Risk warning: Domestic and foreign terminal consumption is weak; offline channel expansion falls short of expectations; improper fee control; exchange rate fluctuations affect LEXINGTON's performance.