Core views

In '23, the company's revenue was 1,921 million yuan/ +31.4%; net profit to mother was 407 million yuan/ +21.8%; 24Q1 company's revenue was 559 million yuan/ +30.7%; net profit to mother was 121 million yuan/ +58.0%, continuing high growth. The 24Q1 company's gross profit margin was 33.3% /+3.3pct, and the net profit margin was 21.6% /+3.7pct. The year-on-year increase was mainly due to high-end product promotion, cost reduction and exchange benefits. The company achieved remarkable results in expanding new customers. 24Q1 received 24 new customers, 2 of which were “the top 100 furniture retailers in the US”. On the product side, the new Moto Living products in the company's new high-end product line are expected to contribute further in 24 years. On the brand side, the company is strengthening its own overseas brand building, and it is expected that the initial results of the MOTO Gallery (store-to-store) model will be revealed in mid-year.

occurrences

The company released its 2024 quarterly report. In the first quarter of 2024, the company's revenue was 559 million yuan/ +30.7%; net profit attributable to mother was 121 million yuan/ +58.0%; net profit after deducting non-return to mother was 113 million yuan/ +82.9%. Net operating cash flow was 76.88 million yuan/ -8.5%; basic EPS was 0.95 yuan/share, +58.3% year over year; weighted average ROE was 3.95% /+1.15 pct.

The company released its 2023 annual report. In 2023, the company's revenue was 1,921 million yuan/ +31.4%; net profit of 407 million yuan/ +21.8%; net profit after deducting non-return to mother of 356 million yuan/ +23.1%; net operating cash flow of 530 million yuan/ +100.9%, mainly due to a decrease in cash from purchasing goods and receiving labor payments in the current period. The basic EPS was 3.18 yuan/share, +21.8% YoY; the weighted average ROE was 14.23% /+1.36pct. The company plans to distribute a cash dividend of RMB 5.0 (tax included) to all shareholders for every 10 shares, transfer 3 shares, and pay a cash dividend ratio of 15.7%.

Looking at a single quarter, 23Q4's revenue was 467 million yuan/ +32.0%; net profit to mother was 85 million yuan/ +9.9%; net profit after deducting non-return to mother was 75 million yuan/ +22.4%.

Brief review

The core category of smart electric sofas contributed to growth, and exports bucked the trend. By category, 1) Smart electric sofas: Achieved revenue of 1,426 billion yuan/ +46.3% in 23, accounting for 74.2% of revenue, gross margin of 33.00%/-0.87pct, sales volume of 684,000 units/ +39.1% in 23 years, average sales price 2086 yuan/ +5.1%. 2) Smart electric bed: achieved revenue of 287 million yuan/ +5.0% in 23 years, accounting for 14.9% of revenue, gross margin of 36.69% /+3.50pct, sales volume of 138,000 pieces/ -3.0% in 23 years, average sales price 2,076 yuan/ +8.2%. 3) Accessories: Achieved revenue of 18,700 yuan/ +2.8% in '23, accounting for 9.7% of revenue, gross margin of 35.67% /+14.24pct, sales volume of 5.31 million units/ +2.5% in '23, with an average sales price of 35.2 yuan/ +0.3%. 4) Other products: Achieved revenue of 21.55 million yuan/ -33.4% in '23, accounting for 1.1% of revenue, and gross margin of 46.10% /-4.22pct.

By region, 1) Overseas: Achieved revenue of 1,902 billion yuan/ +31.5% in '23, accounting for 99.0% of revenue, and gross margin of 33.89% /+1.51pct. In '23, 88.31% of the company's products were sold to the US, and the subsidiary Ingenuity Vietnam achieved revenue of 1,517 billion yuan/ +50.1% in '23, accounting for 78.9% of revenue, 230 million yuan/ +47.2%, accounting for 56.4% of net profit, and a net profit margin of 15.15% /-0.30pct. 2) Domestic: Revenue of 23 million yuan/ +23.2% was achieved in 1973, accounting for 1.0% of revenue, and gross margin of 40.60% /-8.58pct.

New customer development has achieved remarkable results, and cooperation with retailer customers has been strengthened. The company actively maintains relationships with retailers while continuously expanding new customers. In 2023, with the exception of one non-US customer, the company's top ten customers all saw an increase in transaction value, ranging from 4.18% to 653.87%. Among them, 4 customers increased by more than 100%. The top ten customers in the first quarter of 2024 were all US customers, and the transaction amount of the 4 customers increased by more than 50%. In 2023, the company acquired a total of 34 new customers, 32 of which were retailers, 5 of which were “the top 100 furniture retailers in the US.” In the first quarter of 2024, the company received an additional 24 new customers, all of whom were retailers, 2 of which were “the top 100 furniture retailers in the US.” The company attaches importance to cooperation with retailer customers. In 2023, the number of the company's retail customers in the US accounted for 69.14% of the total number of specialty customers in the US; the company's total sales to US retailer customers accounted for 56.06% of the company's total revenue, accounting for 63.45% of the company's revenue in the US market.

The high-end series Moto Living has received orders of 10 million US dollars and has continued to contribute in 24 years. The company adheres to the “uniqueness” and “excellent quality” of the product. From the manufacture of core components to end consumer service, the entire process is independently controlled. With excellent product power and service capabilities, the new nuclear smart electric sofa category has outstanding advantages and contributed to major growth. The company first launched the Moto Living series products at the Gaodian Exhibition in the first half of the year. The products began to be shipped at the end of August, and sold to consumers in retail stores at the end of October and the beginning of November. By the end of March 2024, 45 customers had ordered tens of millions of dollars. Shipments of new products from the October 23 and January 24 exhibitions are expected to begin in late December and early 2024. The retail price of the Moto Living series products reached 5000 to 6000 US dollars/package, helping to further upgrade the company's brand positioning and image.

Make efforts to build independent brands overseas, and increase advertising and publicity within the industry. The company tried to transform from ODM to OBM in overseas markets: ① Based on previous targeted outdoor advertising, the company obtained elevator indoor advertising space at the April 24 high point exhibition; ② expanded the size of the company's showroom in Las Vegas to enhance the showroom, company and brand image; ③ the company visited more retail stores to test and verify the initial results of brand building. It is expected that the initial results of MotoGallery (store-to-store) brand building will be revealed in mid-year.

Product upgrades boosted gross margins, and 24Q1 exchange earnings increased profits. In '23, the company's overall gross profit margin was 34.0% /+1.4pct, net profit margin 21.2% /-1.6pct, 24Q1 gross profit margin 33.3% /+3.3pct, net profit margin 21.6% /+3.7pct. The year-on-year increase in the company's gross margin was mainly affected by high-end product promotion, cost reduction, and high exchange rates. In terms of cost rates, the company's sales, management, R&D, and financial expenses in '23 were 2.9% /-0.5pct, 3.6% /+0.1pct, 6.1% /-0.5pct, and -1.6% /+3.2pct, respectively (decrease in exchange earnings). 24Q1 sales, management, R&D, and financial expenses were 3.0% /+0.1pct, 3.3% /+0.5pct, 5.1% /-0.7pct, and -3.4% /-3.5pct, respectively (increase in exchange earnings).

Profit forecast: The company's revenue for 2024-2026 is expected to be 23.32, 28.00, and 3.322 billion yuan, respectively, up 21.4%, 20.1%, and 18.7%; net profit to mother is 4.82, 5.80, and 698 million yuan respectively, up 18.4%, 20.3% year-on-year, and corresponding PE is 19.9x, 16.5x, and 13.7x, maintaining a “buy” rating.

Risk warning: 1) Overseas macro risk: The company's main customers are overseas customers. On the one hand, under high overseas inflation, interest rate hikes may affect demand, which in turn affects the company's business volume and revenue. On the other hand, the company's performance is affected by exchange rate fluctuations. If the US dollar depreciates, it will also cause exchange losses while affecting the company's gross margin. 2) Independent brand expansion falls short of expectations: Independent brands are currently still in the construction and development stage. If expansion falls short of expectations, it may affect the company's revenue situation. 3) International trade frictions increase risk: The demand side of the company is mainly overseas markets. If international trade friction intensifies, it may adversely affect the company's orders and affect the company's revenue situation.