Introduction to this report:

The company continues to implement the household strategy and actively develop channels, and its performance is expected to achieve steady growth. Key investment points:

Conclusion: Considering that the company's performance is affected by the slowdown in downstream demand growth, the 2024-2025 EPS forecast was lowered to 0.79/0.87 yuan (originally 1.11/1.22 yuan), and the 2026 EPS forecast was added to 0.95 yuan. Referring to comparable company valuations, the target price was lowered to 12.64 yuan (originally 14.43 yuan) to maintain the “gain” rating.

Optimize supply chain operation efficiency and continue to implement cost reduction and efficiency. The company centrally procures major raw materials through the supply chain center and lean production through the iterative MES intelligent manufacturing system. In 2023, the gross margin of the company's main business reached 35.62% /+0.27pct. The results of cost reduction and efficiency were remarkable. The household strategy continued to advance, and category linkage drove revenue growth. The company has continued to implement the big home strategy since 2019. Currently, the store format has been upgraded to “Big Home 4.0”. Through the creation of an atmosphere of display strategy, color and lighting, the share of large household orders is rising steadily, retail customer order value continues to grow, and the share of cabinet and wooden door products in the main business revenue continues to increase. By building a comprehensive product matrix supporting “wardrobe+cabinet+wooden door+wall+finished products” to meet one-stop consumer needs.

By increasing investment in channels and brand operations, retail packaging is expected to continue to gain strength. The company increased investment in retail channels and brand building. In 2023, the company's sales cost rate/management fee ratio increased by 2.78 pct and 1.06 pct year on year. The company promoted the urban operating platform model encryption network in the leading market and actively sank to cover the empty market. In 2023, the scale of the assembly business increased by 70% year-on-year. It is expected that 2024 will focus on promoting brand upgrading and expanding the complete market through increased cooperation with assembly companies.

Risk warning: Overseas customer expansion falls short of expectations; raw material prices fluctuate greatly.