Description of the event

In 2023, we achieved operating income of 9.06 billion yuan, an increase of 1.6%; realized net profit of 690 million yuan, an increase of 54.66%; and net profit without deduction of 580 million yuan, an increase of 68.30%. Equivalent to Q4, we achieved operating income of 3.333 billion yuan, an increase of 9.46%; net profit of 232 million yuan, an increase of 311.38%; deducted net profit of 209 million yuan, an increase of 1213.28%.

2024Q1 achieved operating income of 1,483 million yuan, an increase of 33.37%; realized net profit of 89 million yuan, an increase of 18.81%; and realized net profit without deduction of 80 million yuan, an increase of 38.34%.

Incident comments

The main business grew steadily in 23 years. The company's decorative materials business achieved revenue of 6.856 billion yuan, an increase of 3.23%. Among them, board product revenue was 4.434 billion yuan, a year-on-year decrease of 1.08%; board brand usage fees (including easy-installed brand usage fees) were 432 million yuan, an increase of 14.32%; and other decorative materials amounted to 1.90 billion yuan, an increase of 11.71% year-on-year. The revenue from the custom home furnishing business was 2,117 billion yuan, a year-on-year decrease of 2.77%. Among them, Bunny's whole-house custom revenue was 596 million yuan, an increase of 15.48%. Yufeng Hantang's revenue was 1,147 billion yuan, a decrease of 10.50% year on year. In 2023, gross profit of 1,669 billion yuan was achieved, corresponding to a gross profit margin of 18.4%, up 0.2 pcts; the rate for the whole year was 6.8%, down 1.7 pcts, with sales and management rates falling 0.4 and 0.9 pcts, respectively. Due to long-term equity disposal, the current investment benefits increased by about 0.3 billion dollars over the same period; less impairment of goodwill reduced asset impairment losses by 122 million dollars, and credit impairment losses were lost by 224 million due to bad debt accruals. In the end, net profit without attribution was 580 million, an increase of 68.30%; deducted non-net interest rate of 6.4%, an increase of 2.6 pcts over the previous year.

2024Q1 performance exceeded expectations. 2024Q1 achieved the same increase in reported revenue of 33.37%. It is expected to maintain a slight increase after Class AB conversion, mainly due to the relatively high share of Class B revenue in the same period last year. Q1 achieved gross profit of 265 million yuan, an increase of 4.7%, corresponding to a gross profit margin of 17.9%, a decrease of 4.9 pcts (or mainly due to AB revenue conversion); the rate rate for the Q1 period decreased by 8.6%, down 4.7 pcts year-on-year, of which the management rate decreased 25% mainly due to reduced equity incentive costs and reduced financial expenses due mainly to reduced interest costs for the company to repay loans; other income increased by 6.32 million yuan, mainly due to increased government subsidies; revenue from changes in fair value decreased by 12.38 million yuan, mainly due to fluctuations in the price of Lianxiang shares held by the company; credit impairment Losses increased by 20.86 million yuan due to an increase in accounts receivable accruals; in the end, Q1 realized deducted net profit of 80 million yuan, an increase of 38.34% over the same period.

High dividends and high cash content. The company expects a dividend of 456 million in 2023, corresponding to a dividend rate of 66.1% and a dividend rate of 5.2%.

Furthermore, the company plans to pay a mid-term dividend in 2024, and the total amount of cash dividends paid in the medium term will not exceed net profit attributable to the period. The reason behind the high dividend comes from cash flow support. Net operating cash flow in 2023 was 1.9 billion, far exceeding net profit profit of 690 million yuan, and the impact was still excellent even after excluding supplier accounts (2024Q1 net operating cash outflow of 800 million yuan).

Undervalued and cost-effective. The continuous growth of the company's board has proven growth α. The first point of interest in the future is that there is still room for the expansion of the small B channel; the second is that the channel is sinking to accelerate the layout of the township market. Furthermore, finished home furnishings are expected to continue to grow rapidly using the advantages of base material brands. The estimated net profit for 2024 and 2025 is 740 million, corresponding to PE 12 or 10 times, and valuation flexibility can be expected.

Risk warning

1. Real estate completion expectations continue to be low;

2. Channel development speed is low as expected.