Description of the event
The company achieved revenue/net profit to mother/net profit of 35.38/2.98/209 million yuan, a decrease of 13%/11%/14%; of these, 2023Q4 achieved revenue/net profit/deducted non-net profit of 10.38/0.87/014 billion yuan, +20%/+72%/-72% year-on-year; and the company achieved revenue/net profit/net profit after deducting non-net profit of 8.57/0.43 billion yuan in 2024Q1, +23%/-17%/+22% year-on-year.
Incident comments
Revenue is recovering quarterly, and independent brands are growing at a high rate. In 2023, the company's total revenue decreased by 13%, and export/domestic sales were -18%/+8% year-on-year, accounting for 74%/25% of total revenue, respectively. Expectations of the company's quarterly recovery have been fulfilled. Q1-Q4's total revenue growth rate was -31%/-30%/-1%/+20%, respectively, and 2024Q1 revenue increased further to 23%; independent brand development showed results. Independent brand revenue also increased 67% to 710 million yuan in 2023 (including domestic brands and cross-border e-commerce, accounting for 20% of total revenue). Among them, domestic sales developed rapidly, and the “Double Eleven” omni-channel GMV for the “Double Eleven” chair support product increased 256%. By product, office chair/sofa/massage chair revenue decreased by 8%/34%/32% in 2023, accounting for 72%/15%/7% of total revenue, respectively.
The increase in gross margin for the whole year hedged the impact of rising expenses. The decline in non-net interest rate in Q4 was mainly due to concentrated investment in brand marketing expenses.
The gross margin increased by 3.5 pcts in 2023, with the gross margin of export/domestic sales rising by 3.8/2.6 pcts, mainly due to lower raw material prices, depreciation of the local currency exchange rate, and an increase in the share of independent brands. The sales/management/R&D/finance expense ratio was +3.8/+1.5/-0.5/-0.8 pcts compared to the same period. Among them, the sales expense ratio increased a lot mainly due to the increase in e-commerce investment and promotion expenses in Q4. The increase in gross margin offsets the impact of sales expenses, and overall profit margins are generally stable. 2023Q4's gross margin/attribute/deducted non-net profit margin was +1.1/+2.6/-4.4 pcts year on year, and sales/management/R&D/finance expense ratios were +7.0/+4.1/-3.2/-0.5 pcts year on year, respectively.
The 2024Q1 revenue growth rate increased month-on-month, and the pace of government subsidies affected the apparent growth rate of profits. 2024Q1 revenue also increased 23%, faster than 2023Q4, and 2024Q2 is expected to rise to the next level. The gross margin decreased 0.3 pct year on year, and remained stable; the sales expense ratio increased by 0.9 pct, which is related to the continued increase in marketing investment in independent brands and US retail channels, etc.; the management/R&D/finance expenses ratio also decreased by 0.3/0.1/0.5 pcts; the difference between the two was mainly due to disturbances in the pace of payment of government subsidies without the central government, and the 2024Q1 government subsidy decreased by about 18 million yuan year on year. 2024Q1
The company continues to be deeply involved in the field of office furniture, and has advantages in product research and development, capacity layout, etc. At this stage, the company's foundry and own-brand two-wheel drive, customer expansion and new category expansion are expected to bring new growth poles and strong growth certainty. It has the space and ability to increase its share in the field of office furniture for a long time. After the inventory of overseas customers has been removed, orders have now been repaired. The company has grown rapidly through new customers and new categories (lift tables, e-sports chairs, etc.). Looking ahead to the medium- to long-term, the company's manufacturing cost advantage will continue to strengthen, and the layout advantages of overseas bases such as Vietnam and Romania are expected to continue to increase its share. Domestic independent brands are undergoing a period of rapid growth through product optimization and marketing and channel upgrading strategies in 2023. Online and offline efforts will continue to grow at the same time this year, and are expected to maintain high growth. The company is expected to achieve net profit of 3.4/4.2/51 billion yuan in 2024-2026, corresponding to PE 11/9/8X.
Risk warning
1. Overseas demand falls short of expectations;
2. The results of expanding new customers are low, and expectations are low.