Incident: Easyhouse released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved revenue of 13.512 billion yuan, a year-on-year increase of 4.08%; net profit to mother was 1,300 billion yuan, a year-on-year decrease of 21.10%; net profit after deduction was 1,230 billion yuan, a year-on-year decrease of 27.50%. Among them, in the 2023Q4 single quarter, the company achieved revenue of 3,768 billion yuan, a year-on-year increase of 6.07%; net profit to mother was 149 million yuan, an increase of 31.60%; and net profit after deducting non-return to mother was 46 million yuan, a year-on-year decrease of 33.06%.
In addition, the 2024Q1 company achieved revenue of 3.137 billion yuan in a single quarter, a year-on-year decrease of 3.38%; net profit to mother of 349 million yuan, a year-on-year decrease of 22.88%; and net profit after deduction of 373 million yuan, a year-on-year decrease of 11.96%.
In fact, AIGC technology continued to be promoted, and the digital and intelligent transformation of home furnishings blossomed by product. In 2023, rental management, product sales, franchise management, renovation services, loan factoring interest, and others achieved revenue of 64.28/55.56/5.09/4.08/0.64/546 billion yuan, a year-on-year increase of -11.20%/31.74%/-19.12%/12.72%/-26.14%/22.10%. 1) In the furniture store chain business, the company innovates a “one store, two systems” investment model where fixed rent and sales are divided into “one store, two systems” to break through the revenue ceiling under the traditional fixed rent model while forming risk-sharing and benefit-sharing relationships with merchants. As of December 31, 2023, the investment rate of Pioneer stores increased to 98%. The Sichuan Neijiang store achieved rapid investment promotion through the implementation of a sales sharing model. From the investment promotion conference held on June 12, 2023 to the official opening on December 16, 2023, the investment rate reached 98%, successfully introducing many domestic first-tier brands. 2) In the shopping center and modern department store business, the company determined a new position in the “China Business World” and built the core competitiveness of collaborative digital, intelligent and unique commercial IP; in terms of unique commercial IP, the Changchun “China Business World” Ocean Fantasy Center had a cumulative total of 154,300 visitors in 2023, with an average daily traffic of about 422 visitors. In 2023, it won 1st place in the Changchun Meituan Xinhot Internet celebrity list. 3) Digitalization and intelligent business. The company grasps the three major drivers of digital intelligence transformation. The business focuses on cloud design tool business, 3D business, and precision marketing business with AI design platforms as the core, and accelerates the commercial exploration of “3D+AI+VR” technology. By optimizing large models of industries and scenarios, the speed of 3D whole-house design has increased significantly. Furthermore, the Cambodia Phnom Penh store officially opened at the end of March 2024. The cross-border e-commerce platform “Xinwo” was launched and put into operation, and overseas markets set sail.
Profitability is under pressure in the short term, and expenses are well controlled during the period
In terms of profitability, the company's gross margin in 2023 was 34.11%, down 10.75pct year on year, and the gross margin for the 23Q4 single quarter was 31.81%, down 10.24pct year on year. Among them, the gross margins of leasing management, product sales, franchise management, and decoration services were 46.27%/9.88%/80.25%/28.68%, respectively, up -11.86/-3.42/-3.66/+7.93pct year-on-year, and the gross margin of factoring interest on 23-year loans was 99.47%. Furthermore, the gross margin for the 24Q1 single quarter was 36.73%, down 2.47 pcts year over year. In terms of period expenses, the company's expenses rate for the 2023 period was 24.07%, down 0.35pct year on year. Sales/management/R&D/finance expenses rates were 11.77%/4.29%/0.29%/7.72%, respectively, and +0.64/+0.27/+0.01/-1.07pct, respectively. Among them, the 2023Q4 single-quarter company expense ratio was 27.11%, down 1.51 pct year on year, and the sales/management/R&D/finance expenses ratio was 16.99%/4.71%/-0.14%/5.55%, respectively, +1.29/+0.78/ -0.78/ -2.80pct, respectively.
In addition, the cost rate for the 24Q1 single quarter was 20.60%, up 0.44pct year on year, and the sales/management/R&D/finance ratio was 7.98%/4.35%/0.26%/8.02%, respectively, +0.42/+0.27/+0.06/-0.30pct, respectively.
Under the combined influence, 23 net interest rate was 11.30%, down 3.05 pct year on year; 23 Q4 company net interest rate was 4.39%, up 0.43 pct year on year; 24Q1 company's net interest rate was 11.30%, down 3.05 pct year on year.
Investment advice: Easyhome is a leader in the domestic pan-home furnishing industry. The “direct management+franchise” asset-light model is developing efficiently, leading new retail in the home furnishing industry, while expanding its own IP business to provide integrated home improvement and home furnishing services. Future growth can be expected. We expect Easyhome's 2024-2026 revenue to be 150.07, 163.71, and 17.656 billion yuan, up 11.06%, 9.09%, and 7.85% year over year; net profit to mother will be 13.61, 14.93, and 1,598 billion yuan, up 4.66%, 9.69%, 7.02% year over year, corresponding PE of 14.0x, 12.7x, 11.9x, and a target price of 4.31 yuan, maintaining the buy-A investment rating.
Risk warning: The development of home furnishing stores falls short of the expected risks, the digital transformation process falls short of the expected risks; the risk of repeated epidemics.