Incident 1: Mousse shares released its 2023 annual report. In 2023, we achieved revenue of 5.58 billion yuan, -4.03% year over year; realized net profit of 802 million yuan, +13.25% year over year; realized deducted non-net profit of 783 million yuan, +20.59% year over year. Looking at a single quarter, Q4 achieved revenue of 1,773 billion yuan, +6.86% year over year; realized net profit of 284 million yuan, +0.83% year over year; realized deducted non-net profit of 282 million yuan. In 2023, net cash flow from operating activities was $1,935 billion, +199% year over year. The company plans to distribute a cash dividend of 1 yuan/share (tax included), and distribute a total of 393 million yuan (49% of net profit returned to mother for the year).
Incident 2: Mousse shares released its 2024 quarterly report. In the first quarter, revenue of 1.01 billion yuan was achieved, +25.5% year over year; net profit attributable to mother was 141 million yuan, +39.48% year over year, and realized deduction of non-net profit of 133 million yuan, or +36.44% year over year.
Incident 3: The 2024 employee stock ownership plan was announced. The employee shareholding plan covers 140 people. It is proposed to hold no more than 6 million shares (1.5% of the total share capital), and the shareholding price is 16.28 yuan/share. The performance assessment goals are: 2024/2025 revenue growth rate of not less than 15%/15% year on year, and profit growth of not less than 10%/10% year on year.
Focus on efficient products, streamlined SKUs, and internal cost reduction and efficiency, and continue to implement the profit improvement logic. In terms of profitability, in 2023, the company achieved a gross sales margin of 50.29% (+3.82pct.) , net profit margin of 14.38% (+2.19pct.); 24Q1 gross sales margin of 50.15% (+1.76pct.) in a single quarter The net profit margin to mother was 11.76% (+1.18pct.). Benefiting from: ① business structure optimization, ② SKU reduction, focus on efficient products and cost reduction and efficiency, and the company's profit improvement logic continues to be implemented. In terms of period expenses, the company's sales, management, R&D, and financial expenses rates in 2023 were 25.2%, 5.44%, 3.33%, and -1.10%, respectively, +0.14, +0.07, +0.61, and -0.46pct.
By product: Package sales promote customer order growth and accelerate the development of household business. In 2023, 1) Mattress/bed frames had revenue of 25.8 billion yuan and 1.67 billion yuan respectively, -5.4%/-2.6% YoY, gross profit margin 62.3%/46.6%, +3.4pct./ +6.9pct. In 2023, the company had a total of more than 5,700 direct-operated+distribution stores. In the sleep product business, the company improved efficiency through personnel adjustments and organizational structure optimization. Under channel optimization and product streamlining, package sales promoted an increase in customer order value.
2) Sofas/other products generated revenue of 430,000 yuan and 507 million yuan respectively, -3.6%/-2.3% YoY. In 2023, the company will focus on opening up V6 home furnishing products, and will open 104 new household stores throughout the year through support policies such as decoration subsidies and training and empowerment.
Channel division: E-commerce channel expansion has been effective, and distribution has maintained positive growth. In 2023, the company's distribution/direct operation/direct supply/e-commerce channels had revenue of 41.6/1.5/1.8/1.03 billion yuan respectively, +7%/-50.2%/-76.7%/+29.2% year-on-year. Direct sales transfers have led to changes in the short-term channel revenue growth rate. The direct supply business is mainly affected by the termination of cooperation with major customers. In the main business of sleep, the company vigorously develops e-commerce business. Through resource investment and marketing innovation in major e-commerce channels such as Tmall, JD, and Douyin, the company has achieved rapid social platform business growth.
In 2024, we will strive for omni-channel and multi-category layout, deepening customer value, and lean operation. In 2023, the company focused on the core category of mattresses and simultaneously invigorated the home and sofa business. Currently, it has formed the three main brands of “Healthy Sleep, Large Home, and Sofa”, and is actively reforming on the product, brand and channel side. In 2024, the main Mousse brand introduced strategies such as continuous popular product portfolio packages and incentives to upgrade the distribution system to increase customer traffic, order rate, and sales of high-end products. At the same time, the V6 household business positioned itself as a “young and fashionable home” to accelerate channel construction.
Investment advice: Mousse is a leading domestic mattress brand. The brand and channel side are actively reforming, and the company's market share under the brand and channel moat is expected to further increase. We expect the company to achieve revenue of 64.34, 74.05, and 8.394 billion yuan in 2024-2026, with year-on-year increases of 15.3%, 15.1%, and 13.4%, respectively, and net profit of 8.99, 10.35 billion yuan, and 1,184 billion yuan, respectively (considering terminal sales pressure and the optimization of the company's product structure, and adjusting profit forecasts, the previous forecast values for 2024-2025 are 9.73 billion yuan and 1,125 million yuan), EPS is 2.25, 2.59, 2.96 yuan, maintaining the “buy” rating.
Risk warning: Market competition increases risk, dealer management risk, raw material price fluctuation risk, channel expansion falls short of expectations, etc.