Introduction to this report:
The company's revenue exceeded expectations, the profit-side benefit fee control strategy was vigorously implemented, and the growth rate was also impressive.
Key points of investment:
Profit expectations were raised and the “increase in holdings” rating was maintained. Thanks to the effectiveness of the fee control strategy, 24Q1's performance exceeded expectations. We adjusted the 2024-2025 profit forecast and added a 2026 profit forecast. The company's 2024-2026 EPS is 0.97/1.17/1.33 yuan (the original value in 2024-2025 was 0.93/0.93 yuan). Referring to the industry valuation level, the company was given 15.2xPE in 2024, adjusted the target price to 14.87 yuan (previous value of 15.81 yuan), maintaining the “additional weight” rating.
Q1 Revenue exceeded expectations. The 24Q1 company's revenue was growing. The order performance over the same period was mainly due invoicing and confirmation of revenue from major North American customers in inventory products. Currently, Q2 orders are stable month-on-month, maintaining the level of 100,000 copies in a single month. The Vietnamese factory continues to fully produce; the new Pingfu plant is expected to be put into operation in 2025; the Mexican factory will ship 20,000 copies in a single month.
Excellent fee control performance, contributing to profit flexibility. 24Q1 gross margin/net interest rate without return to mother was 32.9%/7.6%, -2.9 pct/+6.2 pct year on year. The increase in net margin was 1) Financial expense ratio -5.3 pct to -2.2%, which was an increase in exchange earnings. 2) Sales expenses rate - 6.0 pct to 9.1%, maintain large-scale exhibitions and brand investment expenses, and properly control store promotion & event expenses. In addition, Q1 associated companies' investment income and fair value changes had a negative impact of 3.3 pct on profit, mainly due to fluctuations in the stock prices of invested US stock companies.
Export sales are steady, and domestic sales are expanding. 1) Export sales. In early 2024, the electric bed supply agreement was extended with TSI until March 31, 2027, and the five-year electric bed product supply agreement was renewed with Shuda Simmons, demonstrating business stability. 2) Domestic sales. In 2023, “Schuford” opened a total of 109 stores nationwide. Relying on the expansion of “Schuford” stores in 2024, the brand's influence was enhanced.
Risk warning: Prices of raw materials continue to rise, downstream consumer demand falls short of expectations, etc.