Incidents:
On March 30, Jianlin Home Furnishing released its 2023 annual report: In 2023, the company achieved operating income of 4.334 billion yuan/year on year, net profit of 425 million yuan/year on year -7.25%, net profit of 389 million yuan/year on year after deducting net profit of 389 million yuan/year on year. 2023Q4 achieved operating income of 1,244 billion yuan/YoY +47.27%, net profit of 135 million yuan/YoY +33.69%, after deducting net profit of 122 million yuan/YoY +99.61%.
On April 26, Jianlin Home Furnishing released its report for the first quarter of 2024:2024Q1 achieved operating income of 1,153 million yuan/year on year +42.68%, net profit of 123 million yuan/year on year +170.35%, after deducting net profit of 113 million yuan/year on year.
Investment highlights:
Brand potential is gradually showing, and the main business is developing steadily. In 2023, the company's kitchen and bathroom products/water purification products/non-household products/other household products achieved revenue of 28.70/6.23/2.07/608 million yuan, +4.28%/+5.94%/+7.44%/-3.09%, and gross margins of 26.14/25.14/ 26.20%, respectively, +1.32/+2.57/-0.21/+3.12pct. The company gradually formed a multi-brand matrix built from the Remo brand, the Erider brand, and the Water Merlot brand. The online business relied on new communication channels such as e-commerce platforms, short videos, live streaming and community operations to optimize and adjust the channel structure; the offline business covered seven major domestic regions, and the commercial business collaborated with brands such as Starbucks, Domino, and Songzan to accelerate diversified channel development and business integration, and the brand influence steadily increased.
Domestic market business is growing steadily, and overseas market share continues to expand. In 2023, overseas regions/domestic regions achieved revenue of 33.09 billion yuan, +2.13%/+8.56% year over year, gross margin of 28.09/ 19.39%, and +2.01/0.98 pct year on year. The distribution/direct sales channel achieved revenue of 0.4 1/4 267 million yuan, -1.73%/+3.60% YoY. The company closely follows the trend of domestic industrial restructuring and consumption upgrading, explores new models of business development, broadens channels, deepens layout, and cultivates long-term brand value. At the same time, we will continue to expand our overseas market share and deepen our international layout through measures such as strategically investing in overseas bases, improving business collaboration and enhancing local supply capacity.
Fund-raising projects are progressing steadily, and overseas supply chain capabilities continue to improve. The second phase of the Thai base expansion project was successfully implemented, and the overall planning and layout of overseas production capacity such as research in Mexico was actively promoted.
At the same time, the launch of an American subsidiary has effectively enhanced its localized service capabilities in North America, deepened its overseas retail layout in the North American and European belt markets, and further deepened cooperation with home furnishing retailer customers such as Lowe's, The Home Depot, and MENARDS, providing more opportunities to expand market share.
Profitability is relatively stable. 1) In 2023, the company's gross margin was 25.97% /YoY +1.69pct; net margin was 9.79% /YoY -1.15pct. 2) The company's expense ratio for the 2023 period was 14.67%/2.02pct year on year, of which sales/management/ R&D/finance expenses were 3.53%/6.03%/5.51%/-0.39%, respectively, and +0.41/+0.46/-0.60/+1.75pct year on year.
Continue to stabilize dividends to stimulate employees' enthusiasm. In 2023, the company plans to pay a cash dividend of 0.44 yuan (tax included) per share, with a total dividend of 196 million yuan. The total amount of cash dividends accounts for 46.13% of the net profit attributable to mother. In 2023, total employee remuneration reached 885 million yuan/year on year +5.73%, and per capita income generated +5.1% year over year.
Profit forecast and investment rating: The company is a leading domestic kitchen and bathroom product manufacturer. It has been deeply involved in internationally renowned kitchen and bathroom customers for many years, increasing the steady growth of domestic market business, continuing to expand overseas market share, steady progress in fund-raising projects, and continuous overseas supply chain capabilities. In the future, with the introduction of multiple categories and continuous development of new customers, a stable development trend can be expected. We expect the company's revenue in 2024-2026 to be 50.11/57.90/6.696 billion yuan, net profit to mother of 5.01/5.85/683 million yuan, and the corresponding PE valuation is 14/12/10x. First coverage, giving a “buy” rating.
Risk warning: downstream demand falls short of expectations, capacity construction falls short of expectations, risk of exchange rate fluctuations, performance falls short of expectations, valuation and profit forecasts fall short of expectations