Incident: Zhibang Home Furnishing released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved revenue of 6.116 billion yuan, a year-on-year increase of 13.50%; net profit to mother of 595 million yuan, an increase of 10.76%; net profit after deducting net income of 548 million yuan, an increase of 10.04% year-on-year. Among them, 2023Q4 achieved revenue of 2.148 billion yuan in a single quarter, up 16.87% year on year; net profit to mother was 246 million yuan, up 10.52% year on year; net profit after deducting net profit of 224 million yuan, up 11.43% year on year.
In addition, 2024Q1 achieved revenue of 820 million yuan, a year-on-year increase of 1.77%; net profit to mother of 47 million yuan, a year-on-year decrease of 8.38%; and net profit after deducting net income of 39 million yuan, a year-on-year decrease of 10.04%.
The number of wardrobes and wooden doors continues to increase, and category collaboration continues to deepen
By product, overall cabinets, custom wardrobes, and wooden doors achieved revenue of 2,838/25.05/410 billion yuan in 2023, an increase of 3.69%/19.15%/79.92% year-on-year. 24Q1 overall cabinets, custom wardrobes, and wooden doors achieved revenue of 316/3.84/45 million yuan respectively, an increase of -0.71%/8.53%/11.61% year-on-year. The custom wardrobe and wooden door categories are growing rapidly. The main reason is the company's gradual transformation into a strategic layout to provide a one-stop full-space system integration solution. The products cover nine major spaces, including nine major space series products, including overall kitchens, whole-house customization, wooden doors, wall panels, Weiyang, and finished home furnishings. By opening up multiple categories to share multi-channel resources, the company increased investment in informatization, and synergy between products gradually became apparent. Driven by the steady growth in the scale of custom wardrobes, the company is actively expanding contracts and cooperation with well-known domestic and foreign brands of home appliances and finished furniture, such as Japan's Panasonic, Italy's OXO Sanitary Ware, Italy's R&G Furniture, and Airis to create a multi-brand matrix to meet the differentiated needs of different consumer groups. At the same time, the company's doorwall business has completed the initial layout. There are already 983 doorwall product stores nationwide, and the importance of terminal transactions has gradually become prominent. The company grasps the principles of hierarchical classification and orderly expansion, and creates a home supply chain platform with integrated spatial style, material integration, and delivery integration around “kitchen, clothing, door, and bathroom” for all categories of household products to enhance the client experience and terminal marketing efficiency.
The distribution channel is growing steadily, and the overall channel is expanding rapidly
By channel, the company achieved revenue of 31.24/20.09/4.71/150 billion yuan in 2023, respectively, with year-on-year growth of 7.75%/21.22%/18.52%/31.86%. In 2024, the company's distribution, bulk, direct channels and overseas business achieved revenue of 4.57/1.47/0.97/0.44 billion yuan respectively, an increase of -1.78%/9.66%/13.24%/66.61% year-on-year. Among them, 1) In terms of retail channels, the company lays out multi-level markets with an omni-channel and multi-category strategy. As of the end of December 2023, the company had 2,900 dealers in various categories and 4,000 stores in each category. Among them, the number of overall cabinets (distribution stores), wooden doors (distribution stores), and direct-run stores was 1715/1850/983/35, respectively, an increase of 124/235 compared to 2022. 2) In terms of mass channels, the company provides products and services with reasonable design, customized according to demand, batch manufacturing, and on-time delivery. The C-side demand for hardcover real estate is clear. The bulk business is developing in an orderly manner, the national agency business is gradually developing, and the proportion of high-quality customers is gradually increasing. 3) In terms of assembly channels, the company carried out a cloud launch of the Qianping Showroom of Renovation, and successively released multi-dimensional enabling systems such as “Super Service State” and “Efficient Full Space Assembly”, and joined hands with excellent equipment companies to build a new finishing ecosystem.
The overall gross margin performance was stable. The 24Q1 net margin was affected by equity incentive expenses. In terms of profitability, the company's gross margin in 2023 was 37.07%, down 0.62 pct year on year, and the gross margin for the 23Q4 single quarter was 34.65%, down 4.77 pct year on year. Among them, the gross margins of overall cabinets, custom wardrobes, and wooden doors were 40.93%/37.97%/20.98% respectively, up -0.33/ -0.55/ +10.61pct year-on-year. In addition, 24Q1 gross margin was 37.22% in a single quarter, up 0.33pct year over year. In terms of period expenses, the company's expenses rate for the 2023 period was 24.43%, up -0.81 pct year on year, and the sales/management/ R&D/finance expenses ratio was 14.55%/4.82%/5.21%/-0.14%, respectively, and -0.89/-0.15/+0.03/-0.20pct, respectively. Among them, the 2023Q4 company's expense ratio for the single quarter was 22.07%, down 1.91pct year on year, and the sales/management/ development/ finance expenses ratio was 13.89%/3.91%/4.22%/0.05%, respectively, and -1.18/-0.17/-0.64/+0.09pct, respectively.
In addition, the cost rate for the 24Q1 period was 34.17%, up 2.93 pct year on year, and the sales/management/R&D/finance ratio was 18.79%/8.99%/6.90%/-0.52%, respectively, +1.24/+1.63/+0.52/-0.45pct, respectively. Among them, the management fee rate increased a lot. Our analysis was mainly due to the year-on-year increase in share payment costs due to equity incentives.
Under the combined influence, 23 net interest rate was 9.73%, down 0.23pct year on year; 23Q4 company's net interest rate was 11.23%, down 0.62 pct year on year; 24Q1 company's net interest rate was 5.76%, down 0.64pct year on year.
Investment suggestions: The company continues to develop in multiple channels and categories. High-potential categories such as wardrobes and wooden doors are growing rapidly, and the complete business is developing at an accelerated pace, and future growth can be expected. We expect Zhibang Home Furnishing's revenue for 2024-2026 to be 68.23, 75.87, and 8.446 billion yuan, up 11.55%, 11.19%, and 11.32% year-on-year; net profit to mother will be 6.67, 7.47, and 828 million yuan, up 12.14%, 11.87%, and 10.92% year-on-year, corresponding PE of 10.3x, 9.2x, 8.3x, and a target price of 22.78 yuan, maintaining the buy-A investment rating.
Risk warning: Industry competition increases risk; risk of real estate sales growth falling short of expectations; risk of significant increase in raw material costs.