The company announced the 2023 Annual Report & 2024 Quarterly Report. Revenue for the full year of 2023 was 5.315 billion yuan, up 0.03%, and net profit to mother was 572 million yuan, down 1.44%. After deducting non-net profit of 515 million yuan, the same decrease was 3.71%. 2024Q1's revenue was 1,088 billion yuan, down 12.26%, net profit attributable to mother was 89 million yuan, down 49.47%, after deducting non-net profit of 87 million yuan, down 46.49%. The company's operations were dragged down by short-term overseas business. It is expected that the recovery of domestic demand combined with overseas business building will drive the company's steady growth and maintain the purchase rating.
Key points to support ratings
Online sales have maintained steady growth, and the overseas furniture business has fluctuated. Revenue for the full year of 2023 was 5.315 billion yuan, up 0.03% year on year, and net profit to mother was 572 million yuan, down 1.44% from the same period. By channel, offline channel (direct management+franchise) revenue for the full year of 2023 was 3.706 billion yuan, a decrease of 3.30%. The company continued to strengthen its penetration through sinking channels, opening 68 to 2,730 stores throughout the year. Online channel revenue was 1.61 billion yuan, up 8.65%. The company actively deployed multiple online platforms to seize traffic entrances, and maintained steady growth against the backdrop of increased competition for online traffic. Lexington (furniture business) achieved revenue of 1,048 billion yuan, a decrease of 11.61%. The Lexington business is under some pressure due to the high inflation environment in the US in 2023, and there is still plenty of room for improvement in capacity utilization. It is expected that steady overseas demand will drive the business to recover.
24Q1 operations are still under pressure, and we expect a gradual recovery throughout the year. 2024Q1's revenue was 1,088 billion yuan, down 12.26%, and net profit to mother was 89 million yuan, down 49.47%. Operating pressure is still under pressure. We believe that the company's domestic home textile business as a whole has maintained a steady pace of growth, and overseas business will drag down the company's performance in the short term.
Optimizing the product structure led to an increase in gross margin in 2023. The gross margin for the full year of 2023 also increased by 1.31pct to 47.27%. The company continued to optimize the product structure, firmly increase the customer unit price, and the gross margin continued to increase.
Gross margin fell 0.46pct to 43.55% in 24Q1. The company increased its expenditure, and the sales expenses ratio for the full year 23 increased by 3.24/4.28pct to 24.70%/21.75%. The number of inventory turnover days in 24Q1 was 194 days, a decrease of 14 days over the previous year, and inventory levels improved.
Omni-channel expansion continues to advance, and we look forward to a recovery in the company's business situation. The company focuses on bedding research and development, and launches products from different positioning brands to cover multiple levels of demand. The company's offline stores continue to sink and expand and superimpose the promotion of new online retail business. It is expected that the company's business situation will be steady and improving against the backdrop of a recovery in domestic demand combined with a bottom up in overseas business.
valuations
Under current share capital, considering that domestic consumer demand is still in a weak recovery phase and that the overseas furniture business fluctuates in the short term, we lowered our profit forecasts for 2024 and 2025. The EPS for 2024 to 2026 is 0.72/0.84/0.93 yuan, respectively; the price-earnings ratio is 13/11/10 times, respectively, maintaining the purchase rating.
The main risks faced by ratings
Channel expansion falls short of expectations, consumption recovery falls short of expectations, overseas business expansion falls short of expectations