Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 8.195 billion yuan, +26% year-on-year, net profit to mother of 263 million yuan, -27% year-on-year, and net profit after deducting non-return to mother of 235 million yuan, or -27% year-on-year. In 2023, the company calculated a total of 280 million yuan for impairment provisions for various types of assets, including 87 million yuan in goodwill impairment losses. 2024Q1 achieved revenue of 2,354 billion yuan, +39% year on year, net profit to mother of 103 million yuan, +31% year on year, net profit after deducting non-return to mother 103 million yuan, +34% year over year, mainly due to the increase in cross-border e-commerce profits.
By product, office furniture revenue in 2023 was 3.47 billion yuan, +4% year on year, gross profit margin +2.1 pct; soft furniture was 1.29 billion yuan, +3% year on year, gross profit margin 27.3%, +6.5 pct year on year; panel furniture revenue was 1.12 billion yuan, -18% year on year, gross profit margin 18.8%, year-on-year -4.6 pct; new material flooring revenue was 1.49 billion yuan, +557% year on year, gross profit margin 19.9%, year-on-year -7.3 pct.
By sales model, ODM/OEM revenue in 2023 was 4.82 billion yuan, +29% year on year, gross profit margin 20.6%, year on year +4.8 pct; OBM revenue was 3.36 billion yuan, +21% year on year, gross profit margin 28.3%, -1.6 pct year on year.
The ODM/OEM business is gradually opening up new markets. In addition to being deeply involved in the European and American markets, the company has successfully entered the Middle East and South American markets through active participation in exhibitions and active marketing, further enriching the company's products and market structure. In 2023, the company signed a cooperation agreement with the Emirati company Mass Vision to further cultivate the UAE home furnishing market. In 2023, the company's OEM/ODM business revenue increased 29% year-on-year.
Overseas warehouses and supply chain layouts help cross-border e-commerce achieve high growth. In terms of cross-border e-commerce, the company's sales channels cover online retail platforms such as Amazon and Walmart, as well as overseas e-commerce platforms such as TikTok and TEMU, and has set up 5 warehousing and distribution centers in North America to achieve basic coverage for end consumers. In 2023, the company achieved the number one sales volume in the furniture category on the TikTok platform. With the potential of the TikTok platform and KOL influence, e-commerce business revenue for the full year of 2023 reached 1,621 billion yuan, +60.5% over the same period last year.
With increased investment in sales expenses, it is expected that the effects of improving the supply chain will continue to be reflected. The company's gross profit margin in 2023 was 23.8%, +2pct year on year, mainly due to strengthening supply chain management, improving management efficiency, and effectively reducing procurement costs through large-scale collection; the total cost rate during 2023 was 16.4%, +0.7pct year over year, of which the sales expenses ratio was +0.4 pct year on year, mainly due to an increase in marketing fees and payment of employee remuneration, and a financial expense ratio of +0.4 pct year on year, mainly due to an increase in loan interest and a decrease in exchange income. The 2024Q1 company's gross profit margin was 24.8%, -0.1 pct year on year, 19.5% of the period expenses, and -0.2 pct year on year, of which the sales expense ratio was +3.7 pct, mainly due to expanding sales channels and increasing marketing expenses.
Profit forecast and rating: We are optimistic that the company will actively expand its overseas brand business, ODM/OEM and OBM two-wheel drive, gradually complete the transformation from a “manufacturing” enterprise to a “manufacturing+service” enterprise, and the “big household” strategy is progressing steadily. The net profit for 2024-2026 is estimated to be 549 million yuan, 663 million yuan, and 778 million yuan. The corresponding PE is 11x/9x/8x, respectively. Refer to comparable company valuation levels and give a “recommended” rating.
Risk warning: demand for overseas terminals falls short of expectations; fluctuating raw material prices; increased industry competition; risk of exchange rate fluctuations, etc.