Core views:
Oupai Home Furnishing released its quarterly report for '24. 24Q1 achieved revenue of 3.621 billion yuan, up 1.43% year on year, net profit to mother of 218 million yuan, up 43.00% year on year, and net profit after deducting non-return to mother of 143 million yuan, up 10.03% year on year, in line with expectations.
Income is stable under consumption pressure and has gone through a period of internal adjustment. (1) By channel, 24Q1 direct revenue was +66.95%, leading the retail household model to recover on a low base; bulk revenue +18.78%, low-risk bulk business progressed steadily, and customers gradually landed; distribution revenue was -4.95%, still affected by internal adjustments and external consumption pressure; other revenue was +45.59% year-on-year, and overseas markets developed rapidly. (2) By product, 24Q1's cabinet revenue was -1.62% year-on-year, and there is still pressure; revenue from wardrobe and supporting furniture products was -3.55%, due to a phased decline due to the optimization and adjustment of the accessory supply chain; bathroom and wooden door revenue increased 10.22% and 4.96%, respectively. Store optimization and upgrading and follow-up channel collaboration can be expected.
Profitability is improving steadily. 24Q1's gross margin increased by 3.3 pct to 30.0% year on year, benefiting from reduced procurement costs and product structure optimization; net profit margin was 6.02%, +1.8 pct year on year. In the downturn cycle, the company implemented comprehensive cost control and fee reduction measures to improve labor efficiency and material utilization. The results were remarkable. In addition, earnings from changes in fair value and other benefits increased.
Profit forecasting and investment advice. Oupai has strong strategic foresight and strong execution. After completing the reform of the marketing organization structure and reshaping and strengthening of the delivery system, the household strategy continues to advance. It can be expected to show competitive advantages and break through the game in the medium to long term. The net profit for 24-26 is estimated to be 32.1/36.6/4.16 billion yuan. Referring to historical PE valuations, PE was given 18 times in 24 years, with a reasonable value of 94.71 yuan/share, maintaining a “buy” rating.
Risk warning. Real estate demand falls short of expectations; industry competition intensifies; raw material prices fluctuate, etc.