Core views:

The company published an annual report for '23 and a quarterly report for '24. Revenue for 23 years was 3,044 billion yuan, +38.20% year on year, net profit to mother was -0.43 billion yuan in the same period last year, turning a year-on-year loss with net profit of 47 million yuan, and -0.69 million yuan in the same period last year; in a single quarter, 23Q4 revenue was 1,134 million yuan, +84.58% year on year, net profit to mother -41 million yuan, and 24Q1 revenue of 435 million yuan, +10.26% year on year. Revenue growth was high in '23. Profit was greatly affected by impairment, but it still turned a loss into a profit. 24Q1 continued double-digit growth, and profit improved year over year.

All categories have achieved high growth, with the high-end category growing faster. By category, the revenue of steel doors/other doors/smart locks/other businesses in '23 was 19.6/7.2/2.0/170 million yuan, or +26%/+82%/+30%/+63% year-on-year. Steel doors are still the main product, but the share of revenue fell to 64%, and smart locks grew faster than steel doors; other doors grew the fastest, with sales increasing 58%, average price growth of 16%, and the market share and acceptance of high-end categories such as cast aluminum doors and armored doors increased.

The engineering side quickly releases volume, and the distribution network continues to be optimized. By channel, in 23 years, C-side distribution/small distribution B/engineering large B/e-commerce revenue was 5.9/7.3/1.49/60 billion yuan, +29%/+10%/+61%/+19% over the same period last year. The engineering side has been the focus of efforts in recent years. The company signed strategic cooperation agreements with leading real estate companies such as China Resources, Huafa, Vanke, and Longhu, and vigorously expanded the product categories cooperated with engineering customers; the dealer network continued to be optimized, and 446 new dealers were added and 291 replaced in 2023.

Gross margin ushered in an inflection point, expense ratios declined, profits were greatly affected by impairment, and risks were gradually released.

Cash flow has improved dramatically, payables have increased more than accounts receivable, and turnover efficiency has improved.

Profit forecasting and investment advice. We expect the company's 24-25 EPS to be 0.46 and 0.65 yuan/share, respectively. According to the latest closing price, PE will be 17.95 and 12.58 times PE, respectively. The company will be judged to be 20 times PE in 24 years, corresponding to a reasonable value of 9.12 yuan/share, maintaining a “buy” rating.

Risk warning. The recovery in real estate demand fell short of expectations, fluctuations in raw material prices exceeded expectations, and the company's production capacity investment fell short of expectations.