Incident: The company disclosed its 2024 quarterly report, achieving operating income of 1,483 billion yuan, an increase of 33.37%; net profit to mother of 885.479 million yuan, an increase of 18.81% year on year; after deducting non-net profit of 80.377 million yuan, an increase of 38.34% year on year. The company disclosed its 2023 annual report and achieved annual revenue of 9.063 billion yuan, an increase of 1.63% year on year; net profit to mother of 689 million yuan, an increase of 54.66% year on year; after deducting non-net profit of 583 million yuan, an increase of 68.30% year on year. Comments on this are as follows:

The decorative materials business performed well, and Q1 performance increased steadily. Q1 The company's decorative materials business revenue increased 36.1% year on year, driving revenue up 33.37% year on year. The growth rate of performance slowed slightly, mainly due to the fair value profit and loss of Lianxiang shares held by the company - 10.309 million yuan, and accrued credit impairment losses of 22.313,600 yuan. Q1 The company's gross margin/net margin was 17.86/ 6.02% respectively, down 4.89/0.69pct year-on-year respectively. The company's net operating cash flow was -881 million yuan, a year-on-year decrease of 1018.81%, mainly due to payment due and payment of the company's purchase goods; the company's expenses rate during the period was 8.64%, a decrease of 4.74 pct over the previous year. Among them, the sales/management (including R&D) /finance expense ratios were 4.33/4.75/ -0.44%, respectively, a year-on-year decrease of 0.63/3.40/0.71 pct. Financial expenses decreased by 323.35% year on year, mainly due to the year-on-year increase in interest income for the current period; when working capital loans were repaid, interest payments decreased accordingly.

The full-year results bucked the trend, and the Q4 performance was impressive. Q4 The company achieved operating income of 3.333 billion yuan, an increase of 9.46%; net profit to mother of 232 million yuan, an increase of 314.21% year on year; deducted non-net profit of 209 million yuan, an increase of 1213.28% year on year. 1) The main business increased and decreased, and business performance such as brand use and whole-house customization was good. In 2023, the company's decoration materials business achieved revenue of 6.856 billion yuan, an increase of 3.23% over the previous year. Among them, board products/board brand usage fees (including easy-install brand usage fees) and other decorative materials achieved revenue of 44.34/4.32/1,990 billion yuan respectively, with year-on-year changes of -1.08/+14.32/ +11.71% year-on-year; the custom home furnishing business achieved revenue of 21.17 billion yuan, a year-on-year decrease of 2.77%. The customized business Qingdao Yufeng Hantang achieved revenue of 1,147 billion yuan, a year-on-year decrease of 10.50%. By region, domestic and foreign businesses achieved revenue of 87.53 to 309 million yuan respectively, an increase of 1.14/ 18.01% over the previous year. By sales model, the distribution/direct sales/brand licensing model achieved revenue of 56.94/29.27/442 million yuan respectively, with year-on-year changes of +1.99/ -0.68/ +13.99%. 2) Gross margin showed a slight year-on-year recovery. In 2023, the company's gross margin/net margin was 18.42/7.84% respectively, up 0.24/2.66pct year-on-year respectively. Among them, the gross margin of decorative materials/ cabinets/ brand usage fees was 10.97/25.24/ 99.11%, respectively, with a year-on-year change of +0.10/-0.77/+0.07pct. 3) Cash flow and expense ratios have improved. In 2023, the company's net operating cash flow was 1,910 billion yuan, an increase of 104.63% over the previous year, mainly due to the company's strengthening of working capital control, an increase of 642 million yuan in cash received from sales of goods and provision of services, and a decrease of 237 million yuan in cash from purchasing goods and receiving labor payments; the company's expenses rate during the period was 6.78%, down 1.72 pct from the previous year. Among them, the sales/management (including R&D) /finance expense ratios fell to 3.26/3.69/ -0.17%, respectively, a year-on-year decrease of 0.42/0.93/0.37 pct.

Continued dividends pay back to shareholders and boost confidence in development. The company has been implementing a high-dividend strategy in recent years, and total dividends and dividends per share have continued to grow in the past three years. In 2023, the company plans to distribute a cash dividend of RMB 5.50 (tax included) to all shareholders for every 10 shares. The dividend amount is 456 million yuan, accounting for 66.10% of the profit that can be distributed in that year. At the same time, the company plans to formulate a mid-term cash dividend plan for 2024. The total amount of cash dividends paid in the medium term should not exceed the net profit returned to mother for the corresponding period. In addition, the company announced a shareholder return plan for the next three years (2024-2026). In principle, cash dividends will be paid once a year if relevant conditions are met, and an interim cash dividend can also be increased once a year. In the next three years, the company's annual cumulative distribution of profit in cash should be no less than 50% of the profit the company can distribute in that year.

Investment advice: Annual performance bucked the trend and increased, the high-dividend strategy progressed steadily, and maintained an increase in holdings rating. The company's net profit from 2024 to 2026 is expected to be 734, 888, and 994 million yuan, respectively, up 6%, 21%, and 12% year-on-year, respectively, and corresponding valuations are 11, 9, and 8 times, respectively. The concentration of the wood-based panel industry is scattered. As one of the largest sales enterprises in the industry, the company has broad room for future growth. The company continues to promote multi-channel layout, increase channel decline, and further strengthen the competitiveness of the industry.

Risk warning: Increased industry competition; risk of raw material price fluctuations; receivables collection progress lower than expected; channel expansion falling short of expected risks, etc.