The company released the 2023 Annual Report and the 2024 Quarterly Report: 1) 2023: The company achieved revenue of 5.579 billion yuan (-4.0% YoY), net profit attributable to mother of 802 million yuan (+13.2% YoY), and net profit of 783 million yuan (+20.5% YoY). 2) 24Q1: The company achieved revenue of 1,2001 billion yuan (+25.5% YoY), net profit to mother of 141 million yuan (+39.5% YoY), and deducted non-net profit of 133 million yuan (+36.4% YoY). The impact of the low-margin direct supply business subsided, the quality of store operations improved, e-commerce channels grew rapidly, and achieved beautiful growth in 24Q1.
23H2 The growth rate of all categories was fixed, the integration and upgrading of categories was accelerated, and gross margin improved markedly. In '23, the company's mattress/bed frame/sofa/bedding/other main business revenue was 25.81/16.66/4.34/3.29/507 million yuan, respectively, -5.4%/-2.6%/-3.6%/-6.3%/-2.3%. They all experienced single-digit declines. The impact of 23H2 was gradually eliminated, and the year-on-year decline in mattresses narrowed to 0.4%. Bed frames, sofas, bedding, and other main businesses all resumed their growth trend. The core mattress category continues to be upgraded, focusing on promoting T11proAI smart mattresses in 24 years, leading the intelligent use of high-end mattresses; deepening the integration of new categories of sofas with classic Mousse stores; opening 104 new V6 household stores and strengthening channel construction. Benefiting from the reduction in the share of direct supply businesses with low gross margins, product & store upgrades, and supply chain cost reduction and efficiency, etc., the gross margin of all categories increased significantly. The gross margin of mattress/bedframe/sofa in '23 was 62.3%/46.6%/31.9%, +3.4pct/+6.9pct/+3.0pct.
Distribution is developing steadily, and e-commerce is growing rapidly. The company's distribution/e-commerce /direct management/ direct supply revenue was 41.64/10.31/1.48/182 million yuan respectively, +7.0%/+29.2%/-50.2%/-76.7% compared with the same period last year. The company achieved steady growth in distribution channels by introducing cost-effective celebrity packages, encouraging the upgrading of distribution stores, and opening more high-quality home improvement stores, etc., and the gross margin was +3.1 pct to 48.8% year-on-year. E-commerce channels have become the main growth force. Among them, traditional e-commerce is developing steadily, and live streaming sales are driving the rapid growth of emerging e-commerce. Due to the increase in fundraising products and marketing, e-commerce gross margin was -3.2pct to 54.0% year on year. In the future, the company will further optimize the product structure, increase the sales ratio of high-end products, and maintain the rapid and qualitative growth of e-commerce. Direct management experienced a sharp decline due to redistribution. The drastic reduction in direct supply is mainly due to the cessation of direct supply from Europe. If this effect is excluded, the company's annual revenue increased by about 8% year-on-year.
Product and channel structures have been optimized, and profitability has been steadily improved. The company's gross margin was 50.29% in '23, +3.82pct year on year, 50.15% in 24Q1, +1.76pct year on year. Refined cost control. 24Q1 company's sales/management/development/finance cost rates were +0.51 pct/+0.01pct/+0.26 pct/+0.34pct, respectively. The increase in sales expense ratio was mainly due to increased investment in store upgrades. The company's net profit margin in '23 was 14.38%, +2.19pct year on year, 11.76% year on year 24Q1, +1.18pct year on year, and profit margin increased steadily.
Launch an employee stock ownership plan to strengthen the binding of core talents. The company introduced a shareholding plan for employees, covering no more than 140 people. The maximum amount of capital to be raised is 97.68 million yuan, and the price is 16.28 yuan/share. The assessment targets are 24-25 revenue growth rates of not less than 15% and 32.25%, respectively, and 24-25 net profit growth rates of not less than 10% and 21%, respectively, compared to 23.
Profit forecast: Under multi-category integration and upgrading and omni-channel layout promotion, the company's performance is expected to maintain steady growth. We expect the company's net profit for 2024-2026 to be 90 million, 1.02 billion, and 1.14 billion, respectively. The corresponding PE is 14.5x, 12.8x, and 11.5x, respectively, maintaining a “buy” rating.
Risk warning: Channel development falls short of expectations, real estate recovery falls short of expectations, and industry competition intensifies.