Revenue and profit both increased in 2023, and 2024Q1's performance was outstanding. Maintaining the “buy” rating, the company achieved revenue of 3.65 billion yuan (+2.6% year over year, same below), net profit to mother of 292 million yuan (+5.4%), net profit not attributable to mother of 234 million yuan (+22.2%). 2024Q1's revenue was $640 million (+11.4%), net profit attributable to mother was $40 million (+11.2%), and net profit after deducting non-attributable net income of $0.1 billion (+8.2%). The revenue and performance for the single quarter was impressive. Considering that real estate sales are still uncertain, we have lowered our 2024-2025 profit forecast and added a 2026 profit forecast. We expect the company's net profit to be 3.29/3.86/439 million yuan in 2024-2026 (the original 2024-2025 was 4.49/554 million yuan), corresponding EPS was 2.13/2.50/2.85 yuan, and the current stock price corresponding PE is 9.7/8.3/7.3 times. We continue to be optimistic about the company's multi-category and multi-channel expansion to open up room for growth in 2024 Growth can be expected, maintaining a “buy” rating.

Revenue split: The wardrobe and wooden door categories are working together. Overseas channels performed well by category. In 2023, the company's kitchen cabinet/closet revenue was 2.23 billion yuan/1.04 billion yuan/250 million yuan, respectively, with year-on-year changes of -5.55%/+8.65%/+64.97%, and gross margins of 29.22%/29.70%/7.22%, respectively, year-on-year changes of -0.02/+0.53/+0.03pct. Kitchen cabinets showed a slight decline in competition in the industry, and wardrobes and wooden doors showed good growth. By channel, the revenue from bulk/distribution/direct operation/overseas channels in 2023 was 12.8/18.8/1.00/270 million yuan, respectively, with year-on-year changes of -0.29%/+2.58%/-24.05%/+16.92%, respectively, gross margin of 15.41%/35.40%/51.29%/24.65%, with year-on-year changes of +0.80/ -0.63/-18.00/+4.70pct. Overseas channels continued to develop, and revenue growth was impressive.

Profitability: Gross margin remained stable, cost-side control was stable, and the company's overall gross profit margin was 29.6% (+0.1pct) in 2023, benefiting from declining raw material costs + cost reduction and efficiency, and the company's gross margin performance was stable; the period cost ratio was 22.8% (+0.6pct), of which the sales/management/R&D/finance cost ratios were +12.0%/+4.7%/+6.2%/-0.1%, respectively, compared with -0.1/0.0/+0.6/+0.1pct, respectively. The increase in R&D expenses was mainly due to the company expanding new categories and increasing new categories R&D investment. Under the combined influence, the company's net sales margin in 2023 was 7.9% (+0.3pct). On a quarterly basis, 2024Q1's gross profit margin was 28.0% (-1.1pct); the period expense ratio was 25.2% (-1.4pct). Under the combined influence, the company's net sales margin was 5.4% (0.0pct), after deducting the non-net interest rate of 2.2% (-0.1pct). In terms of cash flow, the company's net operating cash flow in 2023 was $644 million (+160.83), mainly due to sales order growth and the company's optimization of supplier procurement management.

Company highlights: The domestic multi-category+multi-channel development is steady, and the overseas layout can be expected in the future. The company's retail channel uses the “140 Strategy” as a starting point to continue to attract investment and build stores, dig deep into the differences between the four major channels of marketing/home improvement/handbag/administrative reform, and empower dealers; the hardcover channel will continue to take risk prevention and control as the premise to expand cooperation with high-quality real estate agents. Overseas, the company determined a differentiated business development model and production delivery guarantee logic, and began a new stage of international development. Looking ahead to channel development, the company will use the Thai manufacturing base as the delivery core, and North America, Southeast Asia, Australia, etc. as the main target markets to establish an integrated supply, production and marketing cycle between the local supply chain and overseas markets, and promote rapid channel expansion.

Risk warning: Market competition intensifies; raw material and labor costs rise, channel expansion falls short of expectations.