The company released the 2023 Annual Report & 2024 Quarterly Report: 1) 2023: The company achieved operating income of 3,645 million yuan (+2.6% YoY), net profit attributable to mother of 292 million yuan (+5.4% YoY), after deducting net profit of 234 million yuan (+22.2% YoY).
2) 2024Q1: The company achieved operating income of 641 million yuan (+11.5% YoY), net profit of 36 million yuan (YoY +11.2%), and net profit of non-return to mother of 14 million yuan (+8.2% YoY). The company's retail operations are stable, and large-scale risk control is growing steadily; in addition, the company has shown results in reducing costs and improving efficiency, and profitability has improved.
The platform office empowers retail, and the bulk is stable, and the overall package continues to grow at a high rate. 1) Retail: Revenue of $1.98 billion in 2023 (+0.9% YoY), gross margin of 36.2% (YoY -2.0pct). Real estate and household consumption promotion policies were implemented, and the company's retail operations were steady. By the end of '23, the number of kitchenware/ closet/ wooden door/ balcony bathroom/ Maneo stores was 1709/1152/660/89/148 (compared to the end of the previous year - 60/+61/+99/+15/+28). The company actively promoted investment breakthroughs in platform branches and offices and the empowerment of terminal stores, and channels continued to sink. 2) Bulk: Revenue in 2023 was 1.28 billion yuan (-0.3% year on year), gross margin was 15.4% (+0.8pct year on year). The company increased its efforts to expand high-quality central state-owned enterprises through agency operations, insisted on strict risk control, and maintained a steady growth rate. 3) Overseas: Revenue of 270 million yuan in 2023 (+16.9% YoY), gross margin of 24.7% (YoY +4.7pct). The company adopted a differentiated market strategy for North America, Australia and Southeast Asia, improved territorial service capabilities, and maintained a high level of overseas revenue growth. 4) Assembly: The company continues to deepen cooperation with leading home improvement companies, while developing luggage channels. By the end of 23, there were 151 finished stores (60 more than at the end of the previous year), and the assembly business continued to grow at a high rate.
Coordination and deepening of the wood category for kitchen cabinets have deepened, and the growth rate of wooden doors is impressive. In 2023, kitchen cabinets/closet/wooden doors achieved revenue of 2.23 billion yuan/1.04 billion yuan/250 million yuan (-5.6%/+8.7%/+65.0% YoY), with gross margins of 29.2%/29.7%/7.2% (-0.0pct/+0.5pct/+0.0pct year-on-year), respectively. The company continues to deepen its household strategy, promote the diversification of categories horizontally, and deepen the synergy effects of the cabinet wood category; in addition, it is expected that it will continue to contribute to growth through cooperative home maintenance and home improvement companies. In terms of products, the company develops its own paint products, which have outstanding performance and high gross profit, which is expected to drive high revenue growth.
The results of cost reduction and efficiency have been shown, and profitability continues to improve. The gross margin of the company in 2023/2024Q1 was 29.6%/28.0% (+0.1 pct/-1.1 pct), and through staffing optimization, labor costs fell from the same period, and the company's gross margin continued to improve; in 23, the sales/management/R&D expenses rates were 12.0%/4.7%/6.2% (-0.1pct/-0.0pct/+0.6pct), the net margin was 8.0% (+0.3 pct year over year), and the 24Q1 sales/management/R&D expenses ratio was 13.3%, respectively/ 6.3%/5.3% (-1.3pct/-0.3pct/-0.5pct), net margin was 5.4% (y-0.0pct). In 23, in order to improve product competitiveness, the cost rate increased, and the cost ratio increased, but as the company achieved results in reducing costs and increasing efficiency, profitability remained steady, moderate, and upward.
Cash flow & operating capacity continued to improve, and Q1 fluctuated in the short term. In 2023/2024Q1, the company's net operating cash flow was 640 million yuan/-430 million yuan (+40 billion yuan/-190 million yuan), respectively. In terms of operating capacity, the company's inventory/receivables/accounts payable turnover days as of the end of Q1 were 101 days/24 days/118 days (-15 days/+2 days/-8 days, respectively), and the operating capacity increased.
Profit forecast and investment rating: The company has strengthened management empowerment and retail transformation. Channels and categories are still expanding, and overall development is accelerating. We expect net profit to be 3.4/40/450 million yuan in 2024-2026, corresponding PE of 9.9X/8.5X/7.5X, respectively, to maintain a “buy” rating.
Risk warning: The recovery in offline consumption fell short of expectations, real estate declined beyond expectations, and industry competition intensified.