Incidents:
In 2023, revenue remained flat at 5.32 billion yuan, with net profit falling 1.4% to $570 million; single Q4 revenue fell 2.2% to 1.56 billion yuan, net profit to mother fell 13.9% to 160 million yuan; 2024Q1 revenue also fell 12.3% to 1.09 billion yuan, and net profit to mother fell 49.5% to 90 million yuan.
Comment:
Overall, 2023 remained steady, with 2024Q1 under pressure. In 2023, the company's revenue remained flat at 5.32 billion yuan, of which the home textile business revenue also increased by 3.4% to 4.27 billion yuan, and the revenue from the US furniture business decreased by 11.6% to 1.05 billion yuan. In the context of a weak recovery in consumption, the company's multi-brand strategy was effectively implemented. The Rollei brand covered the high-end market, and LOVO and other brands covered the mass consumer market. Rollei brand bedding has had the highest overall market share for 19 consecutive years, and the brand is mature. With 2024Q1, the company's revenue also fell 12.3% to 1.09 billion yuan, which is under pressure in the short term.
Online growth is steady, and direct management is expanding rapidly. By channel, the company's home textiles online/direct/franchise/other channels were +8.7%/+31.7%/-3.9%/-3% year-on-year to 16.1/4.1/17.9/460 million yuan, respectively. Online channels, traditional platforms and emerging platforms such as Douyin have developed together, and both won the highest GMV results in the entire network during 618 and Double 11 in 2023. By the end of 2023, the net number of direct-run stores increased by 28 to 335, and the net increase of 40 franchised stores was 2,395.
Profitability is under pressure in the short term. The company's gross margin was +1.3pct/-0.5pct to 47.3%/43.6% year-on-year in 2023/2024Q1, respectively. On the cost side, the 2023 sales/management expense ratio was +3.2pct/-0.8pct year-on-year to 24.7%/6%, and 2024Q1 was 21.8%/9.3%, respectively. Overall, the 2023/2024Q1 net margin remained flat year-on-year /-6pct to 10.7%/8.2%.
The operating situation remains stable. As of 2024Q1, the company's inventory fell 16.8% year on year to 1.3 billion yuan, the number of inventory turnover days fell 13 days to 194 days, and inventory turnover accelerated. The turnaround days for accounts receivables/payables remained stable from -7/+5 days to 32/75 days year on year. As of the end of the 2024Q1 period, the company had monetary capital of 2.26 billion yuan, abundant cash flow, and a healthy financial situation.
In 2023, the company plans to pay a cash dividend of 4 yuan per share, or 58% of the total cash dividend.
Investment advice: As a leading domestic home textile company, Rollei Life values shareholder returns and maintains a high dividend ratio. I am optimistic about the steady growth of the home textile business in the future, and the furniture business is expected to improve. Net profit due to mother is expected to increase 4.4%/11.4%/9.8% year-on-year to 6/67/73 billion yuan in 2024-2026. The corresponding valuation is 13/11/10 times. Covered for the first time, giving it a “buy” rating.
Risk warning: New product development and sales fall short of expectations, channel expansion falls short of expectations, consumption recovery falls short of expectations, profit forecasts and valuations fall short of expectations, etc.