Event: The company released its annual report for 2023 and its report for the first quarter of 2024. In 2023, the company achieved revenue of 3,645 billion yuan, +2.59% year on year; net profit to mother of 292 million yuan, +5.4% year on year; deducted non-net profit of 234 million yuan, +22.15% year over year; and basic earnings per share of 1.89 yuan. In 23Q4, the company achieved revenue of 1,098 million yuan, +3.17% year on year; net profit to mother of 126 million yuan, +11.77% year over year; deducted non-net profit of 124 million yuan, +30.47% year over year. In 24Q1, the company achieved revenue of 641 million yuan, +11.45% year on year; net profit to mother of 36 million yuan, +11.16% year over year; deducted non-net profit of 0.14 billion yuan, +8.24% year on year.
Changes in the channel structure led to a year-on-year decrease in gross margin in 24Q1, and the downward cost ratio supported the stabilization of non-net interest rates.
Gross profit margin: In 2023, the company's comprehensive gross margin was 29.58%, +0.12 pct. In 23Q4, the gross margin for the single quarter was 31.16%, -0.58 pct year over year, and +1.35 pct month-on-month. In 24Q1, the company's comprehensive gross margin was 28.01%, -1.11 pct year-on-year, and -3.15 pct month-on-month. The year-on-year decline in gross margin in 24Q1 is mainly due to an increase in the share of bulk channels and overseas channels with low gross margins.
Expense rate: In 2023, the company period cost rate was 22.81%, +0.56 pct year-on-year. Among them, the sales/management/R&D/finance cost rates were 12.03%/4.67%/6.2%/-0.09%, respectively, with year-on-year changes of -0.11 pct/-0.03 pct/+0.57 pct/+0.13 pct. In 24Q1, the company's cost rate for the period was 25.17%, -1.44 pct year-on-year. Among them, sales/management/R&D/finance expenses were 13.29%/6.27%/5.34%/0.27%, respectively, with year-on-year changes of -1.25 pct/ -0.32 pct/ -0.47 pct/ +0.59 pct.
Deducted non-net interest rate: In 2023, the company deducted the non-net interest rate of 6.41%, +1.03 pct year-on-year. In 23Q4, the company deducted non-net interest rate of 11.32%, +2.37 pct year over year and +4.97 pct month on month. In 24Q1, the company deducted non-net interest rate of 2.2%, -0.07 pct year-on-year, and -9.12 pct month-on-month. The sharp month-on-month decline in 24Q1 deducted non-net interest rates was mainly due to seasonal factors.
The layout of multiple categories is perfect, and wardrobes and wooden doors contribute incrementally. The company's overall kitchen cabinet/overall closet/wooden doors/other business achieved 22.32/10.44/2.46/0.24 billion yuan in 2023, -5.55%/+8.65%/+64.97%/+274.6%, 24Q1 respectively, and 389/1.9/0.25/0.14 billion yuan respectively, +7.63%/+19.91%/-14.88%/+400.32% year-on-year respectively. The company takes wood customization as the core and establishes a collaborative R&D mechanism with other core products such as kitchen appliances, toilets, etc., to achieve a one-stop whole-house customization experience.
Overall, the company's kitchen cabinet business remained basically stable, and the wardrobe and wooden door business maintained relatively rapid growth, continuing to contribute to the increase in performance.
The multi-dimensional channel layout continues to develop, and the 24Q1 bulk business growth rate exceeds 20%.
In terms of retail, the company's dealers/direct-run stores reached 1,881/96 million yuan in 2023, +2.58%/-24.05% year-on-year respectively, and 286/0.05 billion yuan respectively in 24Q1, or -5.32%/-65.34% year-on-year respectively. The company innovatively proposed 140 major retail strategies: continuous investment and store construction, the number of stores was +180 at the end of the year of 23, and +36 at the end of 24Q1 compared to the end of 23; laying out four major segmented channels for online marketing/home improvement/handbag/office reform to deepen strategic cooperation in the home improvement channel; and reverse empower home improvement companies through dealers to cultivate customization+hardware service capabilities to meet the integrated needs of customers. During the reporting period, the company's home improvement and assembly channel business revenue doubled.
In terms of volume, the company's bulk business reached 1,276 billion yuan in 2023, -0.29% year over year, and 24Q1 reached 234 million yuan, +24.73% year over year. On the premise of risk prevention and control, the company thoroughly explores signed strategies, rapidly increases new strategies, and gradually brings categories such as wooden doors and kitchen appliances into hardcover collection. Currently, the hardcover wooden door category has achieved both order placement and investment growth.
Overseas, the company achieved 274 million yuan overseas in 2023, +16.92% year over year, and reached 81 million yuan in 24Q1, +68.23% year over year. The company continues to promote the expansion of RTA distributors in the North American market, and is always cooperating to speed up the signing and implementation of engineering projects; the Australian market develops under the engineering subcontract model; and the Southeast Asian market promotes overseas platform branches to comprehensively strengthen the layout of retail channels, home improvement channels and engineering channels.
Investment advice: The company continues to deepen its all-category and omni-channel strategic layout. The category expansion performance is outstanding. Retail 2C, home improvement B2C, hardcover 2B, and overseas 2G go hand in hand, and there is broad room for future growth. The company is expected to achieve basic earnings per share of 2.2/2.55/ 2.87 yuan in 2024/25/26. The corresponding PE is 9X/8X/7X, maintaining the “recommended” rating.
Risk warning: the risk of large fluctuations in raw material prices, the risk of real estate data falling short of expectations, the risk of household consumption falling short of expectations, and the risk of increased market competition.