Performance summary: The company released its 2023 annual report. In 2023, the company achieved revenue of 22.78 billion yuan, +1.3% year on year; realized net profit to mother of 3.04 billion yuan, +12.9% year on year; realized deduction of non-net profit of 2.75 billion yuan, +5.9% year on year. Looking at a single quarter, 2023Q4 achieved revenue of 6.22 billion yuan, +0.1% year on year; realized net profit of 730 million yuan, +4% year on year; realized net profit of 550 million yuan after deduction, -18.8% year on year. 2024Q1 achieved revenue of 3.62 billion yuan, +1.4% year on year; realized net profit of 220 million yuan, +43% year over year; realized net profit of 140 million yuan after deduction, +10% year over year. 24Q1 continued the growth trend, demonstrating the resilience of leading management.
Gross margin improved year over year, and profitability was steady, moderate and positive. During the reporting period, the company's overall gross margin was 34.2%, +2.5pp year on year; 2023Q4 gross margin was 34.6%, +4.1pp year on year. Benefiting from low raw material prices and the company's procurement cost reduction measures, gross margin improved year-on-year. By product, the gross margin of cabinets is 34.3% (+0.3pp); gross margin of wardrobe and accessories is 36.5% (+4.7pp); gross margin of bathroom is 25.9% (-0.3pp); gross margin of wooden doors is 21.5% (+5.1pp); and gross margin of other products is 16.1% (-5.7pp).
By channel, retail stores achieved a gross profit margin of 35.0% (+3.3pp); the bulk business achieved a gross profit margin of 25.6% (-2.2pp). In terms of the cost ratio, the company's total expense ratio was 18.4%, +1.1 pp year on year, with a slight increase in the cost rate. Among them, the sales expense ratio was 8.7%, +1.2pp year on year, mainly due to the increase in advertising expenses; the management expenses rate was 6.2%, +0.2 pp year on year; financial expenses ratio was -1.4%, -0.3 pp year on year; R&D expenses rate was 4.9%, -0.1 pp year on year. In addition, the company accrued credit impairment losses of about 240 million yuan on some accounts receivable. Taken together, the net interest rate in 2023 was 13.3%, compared to +1.4pp. The company maintained steady, moderate and positive profitability through large-scale procurement and fine management. The company's net operating cash flow in 2023 was 4.88 billion, +102.4% year-on-year, and the cash flow was good. The gross margin of 2024Q1 was 30%, +3.3pp; the total cost ratio was 24.4%, +2.8pp, with sales/management/financial/R&D expenses ratios +1.8pp/-0.5pp/+0.5pp/+1pp, respectively; the net margin was 6%, +1.7pp year on year, continuing the improvement trend.
The retail+home furnishing model continues to iterate, and large homes are expected to maintain their leading edge in the industry. In 2023, the company will promote comprehensive marketing organizational transformation, adjust the original marketing division divided by category into three major marketing divisions according to regions, establish a city-centered business model, carry out unified management of all categories (kitchen, clothing, furniture, and furniture) and omnichannel (retail+assembly), and further match the strategic direction of large households in terms of organizational form. The Group's Direct Sales Division first explored the household practice model and gradually established a business model that can be referred to and replicated for dealers across the country. By channel, in 2023, the company's stores contributed a total revenue of 18.4 billion yuan, up 0.6% year on year, of which direct store revenue was 8.3 billion yuan, +17.4% year on year, and dealership revenue was 17.57 billion yuan, the same year on year; the bulk business achieved revenue of 3.59 billion yuan, an increase of 2.6% year on year.
Direct management, distribution, and bulk revenue accounted for 3.7%, 78.8%, and 16.1%, respectively. The company opened 52 new stores in '23, with a total of 8,786 stores at the end of the period, Opaly opened 24 stores, and there are currently 1,078; Oppony has 55 wooden doors, and there are currently 1001 stores, optimizing store efficiency. At the same time, the overseas division has a multi-line layout, and overseas channels achieved revenue of 320 million yuan in 2023, an increase of 46.5% over the previous year.
Cabinet growth is temporarily under pressure, and Opal's growth is steady. By product, cabinet revenue in 2023 reached 7.03 billion yuan (-2.0%); revenue from closets and accessories reached 11.95 billion yuan (-1.6%); revenue from sanitary ware reached 1.13 billion yuan (+9%); revenue from wooden doors reached 1.38 billion yuan (+2.4%); and revenue from other products reached 8.2 billion yuan (+167.3%). Among them, revenue from wardrobes and accessories declined slightly. Mainly, the company optimized and adjusted the supply chain for wardrobe accessories, and sales growth was temporarily under pressure. By brand, Oppony's revenue reached 18.67 billion yuan (-0.8%); Opponi's revenue reached 1.38 billion yuan (+2.8%). By combining Oppai's business model with its own unique innovation, Oppony's product strength continued to improve; Opponi's revenue was 1.38 billion yuan (+2.4%), and Oppony accelerated its transformation into a household business and achieved steady growth.
Profit forecasting and investment advice. EPS is expected to be 5.48 yuan, 5.90 yuan, and 6.25 yuan respectively in 2024-2026, and the corresponding PE is 11 times, 11 times, and 10 times, respectively. Considering the gradual streamlining of the company's household model, the resilience of industry leaders has been highlighted, and they have maintained a “buy” rating.
Risk warning: The risk of real estate policy fluctuations, the risk of large fluctuations in raw material prices, and increased risk in market competition.