Core views
The company's revenue in '23 was +1.35%, mainly due to the company's internal organizational structure adjustments affecting short-term operations; net profit returned to mother in '23 was +12.92% year-on-year, thanks to the implementation of comprehensive cost control and efficiency improvements. Under consumer pressure, 24Q1 revenue was +1.43% YoY, 24Q1 net profit and net profit not to mother were +43.0% and +10.0% YoY. Under supply chain optimization and adjustment, wardrobes and accessories declined slightly in 23, and 24Q1 bathroom doors drove growth; in '23, large-scale channels increased steadily, overseas business performance was outstanding, and retail households helped increase direct sales channels. The company plans to strive for a 5% to 10% year-on-year increase in revenue and 5% year-on-year increase in net profit in 2024.
It is expected that as the positive results brought about by organizational reforms gradually become apparent, retail+complete homes are expected to drive the company's long-term growth.
occurrences
The company released its 2024 quarterly report: 24Q1 revenue of 3,621 million yuan/ +1.43%, net profit of 218 million yuan/ +43.0%, net profit after deducting non-return mother of 143 million/ +10.0%, net cash flow from operating activities -452 million yuan/ -161.3%, basic EPS of 0.36 yuan/share, +50.0% year-on-year, and weighted ROE of 1.20% /+0.18pct.
The company released its 2023 annual report: 23 billion yuan/+1.35%, net profit of 3,036 billion yuan/ +12.92%, net profit after deduction of 2,746 billion yuan/ +5.91%, net cash flow from operating activities of 4.878 billion yuan/ +102.43%, basic EPS of 4.98 yuan/share, +12.93% year-on-year, and weighted ROE of 17.55% /+0.18pct. It is proposed to distribute a cash dividend of 2.76 yuan (tax included) per share to all shareholders.
Brief review
Revenue was stable in 24Q1 under consumer pressure, and the performance growth rate was better under cost reduction and fee control. The 24Q1 company's revenue was 3.621 billion yuan/ +1.43%. Among them, wooden bathroom doors drove growth, and cabinet products were temporarily under pressure. Net profit of 24Q1, net profit without return to mother was 218 million yuan/ +43.0%, 143 million yuan/ +10.03%. The difference in growth rate was mainly due to profit and loss from changes in fair value in 24Q1 and profit and loss from disposal of financial assets and financial liabilities (40.14 million yuan in 24Q1, 5.09 million yuan in 23Q1) and government subsidies (21.85 million yuan in 24Q1). The 24Q1 company's contract debt is about 1.08 billion yuan/ -37%. It is estimated that the late Spring Festival in '24 mainly affected customer collection time.
The 23 years of internal organizational structure adjustments affected short-term operations, and the refurbished household+retail household progressed steadily. Revenue in '23 was +1.35%, mainly because the company began to adjust plans, carry out institutional reforms and restructure the marketing management system in March '23; net profit to mother was +12.92% YoY in '23, thanks to the implementation of comprehensive cost control and efficiency improvements. Among them, 23Q4 revenue +0.1% year-on-year, net profit attributable to mother +4% year-on-year, and -18.8% YoY after deducting non-net profit. The decline in 23Q4 net profit after deducting non-return to mother was mainly due to 23Q4 prudent credit impairment of 209 million and a 4.1pct year-on-year increase in the 23Q4 expense ratio. The details of the company's business split in '23 are as follows:
1) By category: Under supply chain optimization and adjustment, wardrobes and accessories declined slightly in 23 years, and 24Q1 bathroom wooden doors drove growth. In 2023, the company's revenue from kitchen cabinets, wardrobes and accessories, bathroom, wooden doors and other businesses was 70.31, 119.49, 11.28, 13.78, and 823 million yuan, respectively -1.99%, -1.56%, +9%, +2.42%, and +167.3%. Revenue from wardrobe and accessories declined slightly, mainly due to the company's supply chain optimization and adjustment of wardrobe accessories. 24Q1 cabinet, wardrobe and accessories, wooden doors, and bathroom revenue was 10.7 billion yuan, 19.1, 220 million yuan, and 200 million yuan, compared with -1.6%, -3.5%, +5.0%, and +10.2%, respectively.
2) Channel division: In 23 years, there has been a steady increase in the number of major channels, outstanding overseas business performance, and rapid overall growth. The retail market has helped increase the number of direct sales channels. Retail channel (distribution+direct management channel) revenue in '23 was 18.403 billion yuan/ +0.6%, of which distribution and direct operation revenue was 175.75 billion yuan and 829 million yuan, respectively, -0.04% and +17.44%, respectively. Retail revenue in 23Q4 increased 4.1% and improved month-on-month in Q3. It is expected that in '23, households will maintain a 20% + growth rate. Direct channel growth is mainly due to the company's implementation of retail stores in Guangzhou. At the end of 2023, there are more than 800 retail stores that have applied for the opening of European retail stores. There are about 600 cities. In '23, the bulk channel was 3.586 billion yuan/ +2.61%, of which Q4 was -14.5% year-on-year; overseas channel revenue in '23 was 320 million yuan/ +46.5%. The 24Q1 company's direct management, distribution, and bulk revenue was 1.49, 26.20 million yuan, and 695 million yuan, compared with +66.95%, -4.95%, and +18.78% year-on-year. It is expected that the smooth promotion of the household model will help the direct business grow rapidly. 24Q1 Opal series, Opal, Opunis, Bonis, and other brands had 5848, 1027, 991, 489, and 213 stores, respectively, changing -165, -51, -10, +24, and +54 from the beginning of the year.
Profitability was restored in 23 and 24Q1 due to lower raw material costs and cost reduction and efficiency. The company's gross profit margin in '23 was 34.16% /+2.55pct, mainly due to the decline in raw material procurement prices and the results of internal cost reduction and efficiency measures. 23-year sales expense ratio 8.70% /+1.23pct, management+R&D expense ratio 11.1% /+0.16pct, financial expense ratio -1.35% /-0.25pct, 23-year net interest rate 13.28% /+1.35pct. The 24Q1 company's gross profit margin was 29.98% /+3.3pct. The sales, management, R&D, and finance rates were 11.59%, 8.20%, 6.21%, and -1.55%, respectively. The year-on-year changes were +1.84, -0.49, +0.97, and +0.50pct. The increase in sales expenses was mainly due to the company increasing investment in product promotion. 24Q1 The company's net profit margin was 6.02% /+1.75pct.
Looking ahead to 2024, the impact of organizational restructuring is expected to gradually decline, and the company will continue to further implement the “big home” strategy. The company plans to strive for a 5% to 10% year-on-year increase in revenue and 5% year-on-year increase in net profit in 2024. It is expected mainly from: 1) comprehensively promoting changes in household quality, actively optimizing iterative terminal layouts, and all-round empowerment to help terminals gradually transform large households; 2) creating a city-centered operating model — flexible and effective, adapting to local conditions, and conquering city by city. It is expected that as the positive results brought about by organizational reforms gradually become apparent, retail+complete households are expected to drive the company's long-term growth.
Investment advice: Revenue for 2024-2026 is expected to be 247.3, 268.2, and 28.96 billion yuan, up 8.6%, 8.4%, and 8.0% year on year; net profit to mother is 32.1, 35.0, and 3.80 billion yuan, up 5.7%, 9.2%, and 8.3% year over year. Corresponding PE is 11.9X, 10.9X, 10.1X, maintaining a “buy” rating.
Risk warning: 1) Risk of declining real estate completion and changes in market demand: The economic situation is still relatively weak. Society is already active due to active circulation, and the economy is gradually recovering due to activity, but the business environment and supply chain of domestic and foreign markets will also face uncertainty, or bring uncertainty to the achievement of production and operation goals. 2) Risk of increased market competition: The custom furniture industry where the company is located belongs to the furniture segment. As an industry leader, the company has strong advantages in design and development, brands, services, channels, etc. However, since the custom furniture industry is in a transition period from high speed to medium to high growth, and factors such as the increase in cross-border entrants to the industry, the release of production capacity from listed companies, and fragmentation of passenger flow, changes in internal and external factors have caused industry competition from a low level of competition in product prices to a complex level of competition composed of brands, networks, services, talent, management, and scale. 3) Risk of fluctuations in raw material prices: The raw materials of custom furniture products produced by the company include chipboard, MDF, functional hardware, quartz stone sheets and some outsourced electrical appliances. If the procurement price of raw materials fluctuates drastically in the future, it may have an uncertain impact on the company's profit level.