Introduction to this report:
The main domestic textile industry grew steadily in 2023, and Lexington's business in the US was poor, dragging down the annual performance; 2024Q1's profit is still under pressure, waiting for the US business to improve, and the performance is expected to gradually return to healthy growth.
Key points of investment:
Considering that the company's Q1 performance fell short of expectations, the 2024-2025 EPS forecast was lowered to 0.73/0.84 yuan (0.86/0.97 yuan before adjustment), and the 2026 EPS was added by 0.93 yuan. Considering the company's stable position as a leading home textile company, the investment proposal gave 2024 16 times higher PE than the industry average, maintained a target price of 12.04 yuan, and maintained a “gain” rating.
Incident: 2023 revenue/net profit attributable to mothers/ net profit deducted to mother were $53.2/57/ 5.2 billion yuan, respectively, +0.03%/-1.44%/-3.71%; of these, 2023Q4 revenue/net profit to mother/ net profit deducted to mother were 15.6/1.6/130 million yuan, respectively, -2.2%/-20.5% YoY. 2024Q1 revenue/net profit attributable to mothers/net profit deducted from mother was $10.9/0.9 billion, respectively, -12.3%/-49.5%/-46.5% YoY. Performance fell short of expectations.
The main domestic textile industry grew steadily in 2023, and Lexington's business dragged down performance. In 2023, due to high inflation in the US and changes in the real estate cycle, demand in the furniture market was weak. Lexington's business revenue was -11.6% year-on-year. Profits were under pressure. Excluding the impact of fluctuations in this business, the main domestic textile industry's revenue increased 3.4% year on year. By channel, online/direct/franchise/group buying business revenue was 16.1/4.1/17.9/460 million yuan, +8.6%/+31.7%/-3.9%/-3.0%, including a net increase of 28/40 direct/franchise stores (+9%/+2%), and the gross margin of each channel was +1.7/+0.7/+5.1pct year-on-year.
2024Q1 performance is under pressure in the short term, and US business still needs to improve. 2024Q1's revenue fell 12.3%. Due to the decline in profits of overseas subsidiaries, combined with a year-on-year decrease of 5.53 million yuan in government subsidies, net profit attributable to mother fell 49.5% year-on-year. As a leader in the home textile industry, the domestic home textile business is expected to achieve steady growth through store expansion and efficiency improvement in 2024, and the negative impact on the US business is expected to gradually improve.
Risk warning: The improvement in store efficiency falls short of expectations, and the progress of store expansion falls short of expectations