The company's 2023 revenue and net profit to mother were -1.6% and +7.0%, respectively, and +5.2% and 10.2% year-on-year in 24Q1, respectively. Profit margins and inventory turnover efficiency continued to improve. The company's direct franchise continues to expand stores, has strong channel control, and e-commerce focuses on high-quality development to continuously improve profitability. The net profit scale of the company is estimated to be 635 million yuan, 703 million yuan, and 780 million yuan in 24-26. The current market capitalization corresponds to 2024PE14X and 2025PE13X, maintaining a highly recommended rating.
Revenue declined slightly in 2023, profit side grew steadily, and profitability and inventory turnover efficiency improved.
1) Revenue & profit: The company achieved revenue of 3,030 billion yuan, a year-on-year decrease of 1.62%; net profit to mother of 572 million yuan, an increase of 7.02%; deducted non-net profit of 522 million yuan, an increase of 8.35% year-on-year. Among them, 23Q4 revenue was 1.05 billion yuan, up 0.68% year on year; net profit to mother was 226 million yuan, up 9.12% year on year.
2) Revenue channel: offline direct revenue -1.14% to 723 million yuan (23.86%), offline franchise -0.43% to 824 million yuan (27.20%), online revenue -5.49% to 1,210 million yuan (accounting for 39.95%), group purchase revenue +19.48% to 164 million yuan (accounting for 5.42%).
3) Number of stores: By the end of 2023, the number of company stores increased by 24 to 1,494, including 484 direct-run stores (+13) and 1,010 franchised stores (+11).
4) Increased profitability: In 2023, the company's gross margin increased 2.53 pct to 55.63% year-on-year, including the gross profit margin of offline direct management 70.14% (+3.61 pct), the gross profit margin of offline franchises 56.21% (+3.56pct), and the online gross profit margin 47.99% (+1.69pct). The 2023 net profit margin increased 1.55pct year-on-year to 18.88%.
5) The cost rate for the period increased slightly: the cost ratio increased by 0.16 pct to 33.11% during the 2023 period, including sales expenses ratio of 26.13% (+0.52pct), management expenses ratio of 3.74% (-0.30pct), R&D expenses ratio of 3.56% (flat year on year), and financial expenses ratio of -0.32% (-0.06pct).
6) Inventory turnover efficiency improvement: Net operating cash flow in 2023 was 766 million yuan (+7.9% year over year); the number of inventory turnover days was 196 days (same year on year); and the number of accounts receivable turnover days was 38 days (+12 days year over year).
24Q1 revenue and profit increased steadily. The franchise growth rate was better than direct management, and profitability and inventory turnover efficiency improved.
1) Revenue & profit: The company's revenue was 652 million yuan, up 5.20% year on year; net profit to mother was 122 million yuan, up 10.24% year on year; after deducting non-net profit of 105 million yuan, up 2.40% year on year.
2) Revenue channel: offline direct revenue +4.12% to 156 million yuan (accounting for 23.87%), offline franchise +7.50% to 144 million yuan (accounting for 22.08%), online revenue +1.34% to 281 million yuan (accounting for 43.17%), group purchase revenue +10.51% to 43 million yuan (accounting for 6.66%).
3) Increased profitability: gross margin decreased by 0.13pct to 54.21%. Net margin increased 0.86pct to 18.77%.
4) The cost rate for the period has increased: the cost rate for the period increased by 0.76pct to 33.28%, of which the sales expense ratio is +1.2pct and the management expense ratio is -0.5pct.
5) Inventory turnover efficiency improvement: 24Q1 net operating cash flow was 73 million yuan (-35.8% year over year); inventory turnover days were 223 days (year-on-year -12 days); accounts receivable turnover days were 42 days (year-on-year +9 days).
Profit forecast and investment advice: The company strengthens its brand characteristics with its unique artistic style and seizes the high-end home textile market. Direct franchise continues to expand stores, has strong channel control, e-commerce focuses on high-quality development, and continuously improves profitability. From 2024 to 2026, the company's revenue scale is expected to be 3.294 billion yuan, 3,581 billion yuan, and 3,899 billion yuan, with year-on-year growth rates of 9%, 9%, and net profit to mother of 635 million yuan, 703 million yuan, and 780 million yuan, with year-on-year growth rates of 11%, 11%, and 11%. The current market value corresponds to 2024PE14X and 2025PE13X, maintaining a highly recommended rating.
Risk warning: the risk that customer flow and purchasing power will fall short of expectations; offline store expansion will fall short of expectations; competition in e-commerce channels will increase the risk.