Key points of investment

Oupai Home Releases 2024 Quarterly Report

24Q1 revenue of $3,621 million (+1.43%), net profit attributable to mother of $218 million (+43%), deducted from non-net profit of $143 million (+10%). Non-recurring profit and loss of 24Q1 was 75 million (23Q1 was $0.23 million). The difference was mainly reflected in fair value change profit and loss of 40 million in 24Q1 (2.23 million in 23Q1). 24Q1 The company's operations grew steadily, and its profitability also improved after deducting non-profits.

Plunice continues to expand, and the direct sales channel has performed well

1) Retail: The total number of 24Q1 stores was 8,568 (compared to the beginning of the year - 148), mainly due to the company's continuous optimization of investment promotion and dealer management policies. With 24Q1 dealership revenue of 2.62 billion yuan (-5% YoY) and direct-run stores of $149 million (YoY +67%), the company implemented major retail sales in Guangzhou and provided a business model for dealers across the country, and performed brilliantly.

Among them → Retail Home: By the end of 2023, there were more than 800 cities that applied to open Oupai retail stores, and about 600 cities where retail stores were already operating normally.

Among them → Complete the home: Oppa+Bonis dual brand promotion. Among them, 24Q1 Platinum had 489 stores in 23 (+24 compared to the beginning of the year).

2) Bulk: 24Q1 bulk business revenue of $695 million (+19% year over year).

Category splitting

24Q1 cabinet revenue was 1.07 billion (-1.62% YoY), wardrobe+accessories revenue was 1.91 billion (YoY -3.55%), bathroom 200 million (YoY +10%), wooden doors 220 million (YoY +5%), and others (premium materials, etc.): 154 million (YoY +334%).

24-year channel outlook: Focus on incremental renovation of old houses, iterative upgrading of traditional store formats 1) Old house renovation: On April 30, '24, Chairman Yao pointed out that the renovation of old houses is an important growth point for future European style development. In response to renovation needs, Oupai Home has laid out the home improvement market through remodeling and retail, front-end drainage, and launched the “48-hour Old Kitchen Renewal Package” and “10 Day Full Kitchen Space Renovation” service for old renovation needs. Although the old house renovation business is very difficult, Oupai's previous old kitchen renovation and kitchen and bathroom renovation business already has a certain foundation, while other cities are using kitchen and bathroom as an entry point to open up traffic entrances for old house renovation, which has great potential.

2) Traditional channel restructuring: divided into four models: community stores, large home stores, high-end stores, and factory discount stores. The distribution system is three-dimensional and hierarchical. High-end stores maintain the original high style of Oupai. Large home stores focus on one-stop service. Factory discount stores give full play to their price advantages, and small community stores have low investment and efficiency to meet the needs of multiple levels of the market, while reducing the investment pressure of some dealers.

3) It is expected that the number structure of terminal stores will be further optimized in 24, and the number of traditional single-product stores will decrease. At the same time, the company is increasing investment in online, mobile and other channels, diluting comprehensive drainage costs, and improving terminal profit levels.

4) Organizational adjustments were gradually adapted in September-October '23. The next step is to guide dealers to iterate the original single product stores into large home stores through mergers, modifications, etc., rationally allocate resources, and comprehensively accelerate the construction of a terminal home store system.

Financial Metrics

24Q1 gross profit margin 29.98% (YoY +3.3pct), period expense ratio 24.44% (YoY +2.83pct), including sales expenses ratio +1.84pct yoy, management+R&D expense ratio +0.49pct yoy, and financial expenses ratio +0.5pct yoy.

Profit forecasting and valuation

Oupai Home Furnishing is a leader with strong certainty in increasing its share in the home furnishing industry. We are optimistic that the company will continue to expand into the fields of software, main and auxiliary materials, and reap steady growth in performance from it, with leading information systems as the core and leading information systems as a bridge. The estimated 24-26 revenue is 24.421 billion (+7.19% YoY)/26.393 billion (YoY +8.07%)/28.499 billion (YoY +7.98%), net profit to mother of 3.240 billion (YoY +5.4%)/3.43 billion (YoY +7.19%)/3.39 billion (YoY +9.01%), corresponding PE is 11.88X/11.08X/10.17X, maintaining the “buy” rating.

Risk warning: Channel construction falls short of expectations, real estate regulation exceeds expectations