Description of the event
In 2024Q1, the company achieved revenue/net profit/net profit deducted from non-net profit of RMB 1,842/1.01/96 billion yuan, an increase of 45%/15%/14%.
Incident comments
2024Q1 revenue continues to rise, with both Europe and the US showing impressive performance. 24Q1 revenue also increased 45%, mainly due to the company's smooth expansion of new products and strengthened marketing efforts. 1) By region: Q1, the US growth rate is estimated to continue its superior growth trend (2023Q4 increased by 36%). The overall boom in the US e-commerce channel was good during the period, and the retail channel with no stores in the US increased by 10% during the Q1 period; Europe is estimated to continue its high growth performance around Amazon's leading position on Amazon's multi-country sites (currently the company ranks 1st in the home furniture category on Amazon's German/French/English/Italian sites), while Otto channel estimates continued to increase rapidly (81% increase in 2023, accounting for about 4%); 2) By category: The home category is estimated to continue to grow even better. Contributing with new products, etc. Due to factors, the furniture and pet categories may also perform well. Furniture/home/pet/garden revenue +5%/+22%/+37%/-12% in 2023.
2024Q1 profit declined slightly and is expected to improve in the future. Q1 gross margin fell 0.8 pct year on year. Among them, factors such as an increase in European revenue share and supply chain optimization had a positive impact on gross margin, but due to disturbances such as rising shipping prices and tail end costs, gross margin was under pressure. Q1 Sales/management/R&D expense ratios were +1.6/-0.01/-0.3 pcts, respectively. Among them, the increase in sales expenses was mainly due to the company's focus on long-term development, increasing investment in product promotion and additional sales staff. Q1 The company's financial expenses were RMB 25.54 million, or exchange losses due to the appreciation of RMB against the euro at the end of the period compared to the beginning of the period, and hedging generated a certain amount of income (net income from fair value changes of about RMB 3.91 million).
The company's work priorities this year include: 1) Product serialization. The company focuses on SONGMICS HOME's core brand to further create serialized scenario-based products. The first batch of serialized products, EKHO Collection, has been released and launched in 2023, covering restaurants, bedrooms, dining rooms, kitchens, etc. 2) Continue to reduce overall costs and improve efficiency, including promoting standardization and standardization of materials, processes, components and connectors in the production process, promoting second-level material collection, launching the IBP Phase III supply network, and strengthening the level of informatization in the ecosystem to continuously improve efficiency. At the same time, by increasing the share of Southeast Asian procurement to optimize costs & efficiency, the company aims to increase the proportion of Southeast Asian shipments to the US by about 20%. 3) Optimize warehouse distribution, Europe promotes delivery from front warehouses such as France and Spain, and the US region encrypts overseas warehouses to increase the spontaneous proportion of last-end processes and optimize the timeliness and cost of last-end contract execution. 4) Steady growth in Europe, breaking through the US, including focusing on Amazon Vendor channels and focusing on top listed products.
The brand is a pioneer in overseas markets, deeply involved in the furniture and home furnishing category. It relies on the manufacturing advantages of the Chinese home furnishing industry chain, and is committed to building an “online IKEA”. At present, the company still has a lot of room to improve against IKEA's tens of thousands of SKUs; in the future, it will continue to drive growth by increasing shares, expanding categories (already developing home textiles), and expanding channels (OTTO, Mano, etc.) into Shein and Tiktok Shop's emerging cross-border e-commerce platforms, as well as offline KA channels such as Hobby Lobby) and markets (Mexico, Australia, etc.). In the medium to long term, the company promotes serialization and differentiation of product development, and continuously improves supply chain management and efficiency. The company is expected to achieve net profit of 48/61 million yuan in 2024-2025, corresponding to the current PE of 20/16x, maintaining a “buy” rating.
Risk warning
1. The improvement in external demand fell short of expectations;
2. The operating results of the company's e-commerce platform fell short of expectations.