Brief performance review
On May 23, 2024, the company announced its results for the first quarter of 2024: revenue of 16.4 billion yuan, -19.2% year on year; adjusted net profit of 1.39 billion yuan, -60.9% year on year; net profit to mother of 430 million yuan, -84.3% year on year.
Management analysis
Both revenue and profit performance declined in the first quarter. The decline in the company's revenue was mainly due to a decrease in revenue from the stock housing and new housing business, but due to the increase in revenue from businesses such as home improvement, home rental services, etc., the decline in the company's revenue was less than the decline in profit. The decline in adjusted net profit and net profit attributable to mother was mainly due to changes in the business structure, the decline in revenue from integrated businesses with high gross margin, while the increase in revenue from leasing businesses with low gross margins caused the company's overall gross margin to drop 6.1 pct to 25.2%, and gross profit decreased 35.1% year on year to 4.1 billion yuan.
Affected by the slump in the market and the high base last year, the operating performance of the integrated business was under pressure. In 2024Q1, the company's GTV for new homes was 151.8 billion yuan, -45.4% year on year; GTV for stock housing was 453.2 billion yuan, -31.8% year-on-year. Corresponding new housing business revenue was 4.92 billion yuan, or -41.5% year on year; stock housing business revenue was 5.73 billion yuan, -37.6% year over year. The year-on-year decline in the integrated business was large, mainly due to the concentrated release of demand in the same period last year, and the market popularity was high, resulting in a high performance base, while market performance in the first quarter of this year was relatively sluggish.
The Tri-Wing business developed rapidly, creating a second growth curve. 2024Q1's Home Improvement and Home Furnishing GTV was 3.4 billion yuan, +26.1% YoY; revenue was 2.41 billion yuan, +71.1% YoY. Housing rental revenue was 2.63 billion yuan, +189.3% year-on-year. The emerging business GTV was 21.5 billion yuan, -19.3% year over year; revenue was 7.0 billion yuan, +85.3% year over year. Facing the fluctuating market environment, the company is steadily advancing the “three wings of one” strategy and actively building a second growth curve. As of 1Q24, the total revenue share of the three major businesses of home furnishing+housing leasing+emerging business had risen to 35.0%, an increase of 21.7pct over the previous year, which has become an important support for the company's performance during the current period.
Profit Forecasts, Valuations, and Ratings
Although market fundamentals have not been significantly repaired, and the company's integrated business performance is under pressure, considering the good growth momentum of the Tri-Wing business, we kept the original profit forecast unchanged. We expect the company's non-GAAP net profit for 2024-2026 to be 10.79 billion yuan, 10.96 billion yuan, and 11.62 billion yuan respectively, with year-on-year growth rates of +10.2%, +1.6%, and +6.0%, respectively. The closing price of the company's stock corresponding to the 2024-26 PE valuation (corresponding non-GAAP net profit) was 15.6x, 15.4x, and 14.5x, respectively, maintaining a “buy” rating.
Risk warning
The recovery in real estate sales fell short of expectations; the risk of negative public opinion erupted; and rates continued to be lowered.