Revenue and net profit attributable to mother in '23 were -2%, +7% YoY, 24Q1 +5%, +10%. Fuana released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 3,030 billion yuan, a year-on-year decrease of 1.62%, net profit of 572 million yuan, a year-on-year increase of 7.02%, after deducting non-net profit of 522 million yuan, an increase of 8.35% year-on-year, EPS of 0.69 yuan, and a cash dividend of 0.65 yuan (tax included) per share, and a dividend rate of 95%.
The decline in revenue and profit growth in '23 was mainly due to a 2.53 PCT increase in gross margin, and net profit margin increased by 1.55 PCT to 18.88% year over year. On a quarterly basis (adjusted before caliber), 23Q1-Q4 companies' revenue in a single quarter was -7.57%, -1.88%, +0.68%, respectively, and net profit to mother was +5.28%, +2.28%, +9.17%, and +9.52%, respectively.
In terms of the first quarterly report, 24Q1 achieved revenue of 652 million yuan, a year-on-year increase of 5.20%, net profit of 122 million yuan, a year-on-year increase of 10.24%. The profit growth rate was faster than revenue mainly due to a year-on-year increase of 358.55% of other income to 10.68 million yuan (mainly due to increased tax rebates and government subsidies); net profit after deducting non-net profit increased 2.40% year on year to 105 million yuan.
E-commerce/franchise/direct sales revenue was -5% /flat/-1% year-on-year, and the total number of stores increased by 1.6%. Looking at categories, kits, quilts, and pillows accounted for 39%, 40%, and 7% of revenue in '23, respectively. Revenue was -0.80%, +1.40%, and -4.35%, respectively.
By channel, e-commerce, franchise, direct management, group buying, and other channels accounted for 40%, 27%, 5%, and 4% of revenue, respectively. Revenue was -5.49%, -0.43%, -1.14%, +19.48%, and +5.23%, respectively; 24Q1 increased by about 1.3%, 7.5%, 4.1%, 10.5%, and 42.0%, respectively.
In terms of stores, the total number of the company's stores at the end of '23 was 1,494, 172 newly opened, and 148 closed, with a net increase of 1.63%. Among them, 484 direct-run and franchised stores were 484 and 1,010, respectively, with net increases of 2.76% and 1.10% respectively.
Gross margin increased, expense ratio stabilized, inventory decreased, and net operating cash flow increased gross profit margin: The gross margin increased by 2.53 PCT to 55.63% year on year in 23, and gross margin increased to varying degrees in each quarter, mainly due to the shift in production capacity of some low customer unit price products, a decrease in manufacturing costs, and the increase in revenue share of high-end products. By category, the 23 year gross margins of the kit category and the quilt category were 57.82% and 54.88%, respectively, compared with +1.67 and +2.12 PCT, respectively. By channel, the gross margins of e-commerce, franchise, and direct management for 23 years were 47.99%, 56.12%, and 70.14%, respectively, compared with +1.69, +3.56, and +3.61 PCT, respectively. 24Q1 gross margin fell slightly by 0.13 PCT year on year and remained flat. Among them, franchise gross margin was stable, and direct management and e-commerce declined slightly year on year.
Expense rate: The cost ratio increased slightly by 0.16 PCT to 33.11% year-on-year during the 23-year period. Among them, sales, management, R&D, and finance expenses were 26.13% (+0.52 PCT), 3.74% (-0.30PCT), 3.56% (flat), and -0.32% (-0.06PCT), respectively. On a quarterly basis, the cost rates for a single quarter from 23Q1 to 24Q1 were -0.79, +1.35, -1.94, +1.26, and +0.76PCT, respectively. Among them, 24Q1 sales, management, R&D, and financial expense ratios were +1.18, -0.48, +0.36, and -0.30 PCT, respectively.
Other financial indicators: 1) Inventory decreased by 7.70% year on year to 701 million yuan at the end of March '24, up 11.30% from the beginning of the year. The number of inventory turnover days in 23 and 24Q1 was 196 days and 223 days, respectively, the same level and decrease of 12 days year-on-year. 2) Accounts receivable increased by 51.38% year on year to 388 million yuan at the end of March '24, down 42.60% from the beginning of the year. The number of accounts receivable turnover days in 23 and 24Q1 was 38 days, 42 days, +12 days year on year, and +9 days, respectively. 3) Net operating cash flow was 766 million yuan in 23 years, up 7.89% year on year, and decreased 35.75% year on year in 24Q1.
Stable performance in 23, and we expect home textile leaders to continue to grow at a high quality in '23. Although the company's revenue declined slightly year on year, operating indicators such as gross profit margin, net interest rate, and inventory improved, and the 24Q1 company's revenue growth rate improved. In '23, the company carried out unified plans for store design and display, product innovation, and multi-series fashion product development, etc., and gradually laid out super image stores in key cities across the country, and the number of channels showed a steady expansion trend. In 24, the company will continue to strengthen its brand image, steadily expand the number of stores, enhance endogenous store efficiency, and empower dealers. E-commerce channels will continue to seize share. At the same time, the company will increase high-end product development, improve overall management efficiency, and promote high-quality performance growth.
We continue to be optimistic about the company as a leader in home textiles, continuously improving product strength and brand power to achieve steady and high-quality growth. It is expected that revenue will maintain steady growth in 24 years, and the profit side will grow slightly faster than revenue. At the same time, the company has undervalued and high-dividend attributes. The company's average dividend ratio from 2021 to 2023 was 5.74% (calculated based on the closing price of April 26). We maintained the company's 24-25 profit forecast and added a 26-year profit forecast, corresponding to the 24-26 EPS of 0.76, 0.85, and 0.93 yuan, respectively, and the 24-year and 25-year PE was 14 times and 13 times, respectively. As a leading home textile under external fluctuations, the company's performance is more stable, and it also has high dividend attributes, and was raised to a “buy” rating.
Risk warning: weak demand for terminal consumption; risk of rising labor costs and price fluctuations of raw materials; slowing e-commerce growth or rising traffic costs; offline channel expansion falling short of expectations; improper fee control, etc.