Conclusion: Considering that downstream demand is still recovering, the 2024-2025 EPS forecast was lowered to 2.14/2.46 yuan (previously 2.31/2.65 yuan), and the 2026 EPS forecast was added to 2.72 yuan. Referring to comparable company valuations, the target price was lowered to 25.68 yuan (originally 27.72 yuan) to maintain the “gain” rating.
Event: The company achieved revenue of 3,645 million yuan/ +2.59% in 2023, and realized net profit of 292 million yuan/ +5.40% to mother. 2024Q1 achieved revenue of 641 million yuan/ +11.45%, and realized net profit of 36 million yuan/ +11.16%. The performance was in line with expectations.
Revenue growth has been steady, and category linkage has achieved remarkable results. In 2023, the company's kitchen cabinet/closet/wooden door revenue was -5.55%/+8.65%/+64.97%, respectively. The gross margin remained stable, and the pressure on kitchen cabinet revenue was mainly affected by terminal demand. Distribution/direct-management/bulk business revenue in 2023 was +2.58%/-24.05%/-0.29% respectively. The decline in direct sales revenue was mainly due to the conversion of some direct-run stores to dealerships, and distribution and bulk gross margins were basically stable. 2024Q1's revenue increased significantly, mainly driven by sales of kitchen cabinets and wardrobes. Net operating cash flow decreased by 80.56%, mainly affected by increased employee compensation and benefits payments and supplier payments.
Diversified businesses are expanding steadily, and luggage, home accessories, and overseas are expected to contribute to growth. The company adheres to the “Big Retail 140” strategy and opens up growth through diversified business. Although the luggage business is relatively small, it is expected to continue to contribute revenue after focusing on efforts in 2024. After the integration of the home accessories department into the retail system, integrated sales packages are expected to usher in significant growth. The overseas business achieved revenue of 274 million yuan/ +16.92% in 2023, and the gross margin increased by 4.70 pct. The company is expected to achieve steady growth by increasing coverage by building production capacity in Thailand and the US.
Risk warning: Prices of raw materials fluctuate greatly; downstream demand falls short of expectations.