Incident: Gujia Home Furnishing released its 2023 annual report and the report for the first quarter of 2024. In 2023, the company achieved operating income of 19.212 billion yuan, a year-on-year increase of 6.67%; net profit to mother of 2,006 billion yuan, an increase of 10.70%; net profit after deducting net income of 1,781 billion yuan, an increase of 15.34% over the previous year. Among them, 23Q4 achieved operating income of 5,076 billion yuan, a year-on-year increase of 19.49%; net profit to mother of 505 million yuan, an increase of 23.46%; and net profit of 416 million yuan after deduction, an increase of 58.29% over the previous year. In addition, 24Q1 achieved operating income of 4.350 billion yuan, an increase of 10.04% year on year; net profit to mother of 420 million yuan, up 5.02% year on year; net profit after deducting net income of 376 million yuan, an increase of 10.29% year on year.
Bed and custom categories have grown steadily, and the overall quality of foreign trade operations has improved dramatically. Looking at each channel, the company has optimized the traditional channel structure and increased the scale of the complete channel; Gujia Brand's annual order completion rate exceeds 100%, and the shopping center channel has broken through. By category, in 2023, the company's sofas, bed products, integrated products, and customized products achieved revenue of 93.50/41.04/30.28/880 billion yuan, which was +4.21%/+15.36%/+0.39%/+15.57% year-on-year respectively. The company continues to change its manufacturing model and lean management, so that the cost reduction performance of bedroom products is good, and the product and marketing approach has improved, and the mattress category has achieved steady growth. At the same time, the annual procurement cost reduction rate for customized products reached 7%, and the contribution rate of new products increased year-on-year. In '23, the company has been deeply involved in the integrated whole model and continued to expand the customized category. Looking at the subregion, 1) Domestic sales achieved revenue of 10.935 billion yuan in 2023, an increase of 6.13% over the previous year. 2) Export sales achieved revenue of 7.515 billion yuan, an increase of 6.84% over the previous year. The company Costco made a breakthrough in new category cooperation; the SPO project further expanded the customer range of the 3-week express delivery model; the foreign trade OBM benchmark store project was initially constructed based on material standards for middle- and low-end products.
In terms of base construction, several manufacturing bases have made significant progress. Vietnamese companies have established value chain management and control mechanisms to increase efficiency and reduce costs and double profits, while domestic bases are also steadily improving efficiency.
Gross margin benefits from cost reduction and efficiency have improved. In terms of cost control and profitability, the company's comprehensive gross margin in 2023 was 32.83%, up 2.00 pct year on year; 23Q4 company's comprehensive gross margin was 34.18%, down 1.48 pct year on year; 24Q1 company's comprehensive gross margin was 33.08%, up 0.95 pct year on year. In terms of period expenses, the cost rate for the 2023 period was 20.68%, up 1.30pct year on year, and the sales/management/R&D/finance expenses ratio was 17.52%/1.79%/1.38%/-0.01%, respectively, and +1.13/-0.22/-0.29/+0.68pct, respectively. The 2023Q4 company's cost ratio for the period was 23.34%, up 1.88pct year on year, and the sales/management/ R&D/finance expenses ratio was 21.13%/0.70%/1.36%/0.16%, respectively, +4.25/ -1.16/-0.22/ -0.99pct, respectively. The 2024Q1 company's cost rate for the period was 21.96%, up 0.50pct year on year, and the sales/management/R&D/finance expenses ratio was 17.41%/3.32%/1.42%/-0.19%, respectively, +0.52/+1.46/-0.16/ -1.33pct, respectively. Under the combined influence, the company's net interest rate in '23 was 10.50%, up 0.25pct year-on-year. In 23Q4, the company's net margin was 10.16%, up 0.62pct year-on-year. 2024Q1's net margin was 9.83%, down 0.33pct year over year.
Investment advice:
Gujia Home Furnishing's management team is excellent, the advantages of integrated software+customization development are gradually showing, the results of the reform of regional retail centers are gradually showing, and new high-potential categories are growing strongly, and future acceleration can be expected. With the optimization of the industry pattern, the market share is expected to increase further. We expect Gujia Home Furnishing's revenue for 2024-2026 to be 212.98, 238.02, and 26.548 billion yuan, up 10.86%, 11.72%, and 11.54% year-on-year; net profit to mother will be 22.25, 24.84, and 2,754 billion yuan, up 10.92%, 11.65%, and 10.85% year-on-year, corresponding PE of 12.9x, 11.6x, 10.4x, and a target price of 53.10 yuan, maintaining the buy-A investment rating.
Risk warning:
The risk that the development of new channels is not as good as expected; the risk of fluctuating raw material prices; the risk of increased industry competition, etc.