Matters:
The company released the 2023 Annual Report and the 2024 First Quarter Report. In '23, the company achieved revenue of 3.74 billion yuan, +16.5% year-on-year; net profit to mother of 0.39 billion yuan, compared to -0.3 billion yuan for the same period in '22; deducted non-net profit of 0.34 billion yuan, or -0.37 billion yuan for the same period in '22. In 24Q1, the company achieved revenue of 0.63 billion yuan, -8.2% YoY; net profit to mother 0.03 billion yuan, or -50.8% YoY; deducted non-net profit of 0.02 billion yuan, or -50.0% YoY.
Commentary:
Domestic and foreign markets are expanding steadily, and multiple channels drive growth. (1) By product, the company's revenue in 23 was 21.7/0.83/0.23/0.3 billion yuan, YOY +8.6%/+22.7%/+11.8%/+71.5%, gross margin was +1.5/+2.8/+1.2/+3.1 pct, and overall gross margin improved. (2) Looking at the split price, in 23 years, the sales volume/average price of molded sandwich doors was +17.0%/-7.2%, respectively, and the sales volume/average price of solid wood composite doors was +18.4%/+3.7%, respectively. (3) By region, the revenue from domestic/export sales in '23 was 3.44/0.09 billion yuan, +15.5%/+16.8% over the same period. In '23, the company continued to explore overseas markets and strengthen product sales system construction and new product development in mainstream markets. (4) By sales model, the company's distributors/bulk channels achieved revenue of 0.98/2.55 billion yuan in 23 years, +11.9%/+17.0% year-on-year.
Dealer channel revenue grew steadily, and the company continued to sink/develop channels to cultivate various dealers and installation service providers. At the end of 23Q4, the number of dealers in the company was over 0.036 million (more than 0.024 million in the same period in '22), achieving rapid growth. The revenue growth rate of the bulk channel was impressive. The engineering channel implemented omni-channel and multi-category sales, creating new growth space by developing the hardware/rough market and entering multiple tracks such as hotels, and promoted the same increase in revenue of the engineering channel by 12.4% to 1.34 billion yuan in 23 years. At the same time, as the number of agents continued to increase, the share of the clean-up business continued to increase, driving agent channel revenue to increase 22.1% to 1.11 billion yuan year-on-year in 2023. In '24, the company plans to deepen e-commerce cooperation and cultivate and empower agents, which is expected to bring new growth points.
Profitability increased significantly in 23 years, and 24Q1 was affected by multiple factors, putting short-term pressure on the profit side. 1) In '23, thanks to the continuous promotion of marketing changes and the release of scale effects, the company's annual gross margin increased by 2.2 pct to 26.0%.
On the cost side, we achieved a sales/management/R&D/finance expense ratio of 7.5%/2.6%/3.4%/0.4% in 23 years, compared to -1.9/-0.4/-0.5/+0.04pct. Taken together, the net profit margin was +19.7pct to 10.4%. 2) 24Q1 achieved a gross profit margin of 18.8%, a year-on-year ratio of -2.9 pct; the sales, management, R&D and financial expenses ratio for the period was 8.2%/2.9%/2.6%/0.4%, +1.0/+0.2/-0.8/-0.1 pct year over year. Taken together, the net interest rate to mother was 4.6%, -4.0pct year on year, and the decline in net profit in 24Q1 may be due to a high base for the same period in '23, a decline in revenue in 24Q1, a year-on-year decrease in the unit price of engineering channel products/the same reduction in government subsidies. With the increase in capacity utilization at production sites in Yongchuan, Chongqing and Lankao, Henan, the scale effect is expected to be unleashed, and the profit side is expected to improve in the long term.
Investment advice: Optimistic about the company's strategic policy of platform empowerment, partnership sharing, marketing leadership, product drive, and supply is king. The diversification of channels in the direct engineering sector creates new growth space. The retail sector is expected to increase conversion rates under the accelerated investment, hot sales strategy+toolkit model, and the agent sector gradually enters the hospital/apartment sector, and is expected to increase as the share of effective customers increases.
Considering that downstream demand is still under pressure, we expect a profit of 0.405/0.461/0.517 billion yuan in 24/25/26 (0.463/0.552 billion yuan before 24/25), and the corresponding PE is 11/10/8X. Referring to comparable company valuations, a 24-year 15X PE was given, corresponding to a target price of 34.3 yuan/share, maintaining a “strong push” rating.
Risk warning: Macroeconomics affects demand; risk of fluctuations in raw material prices; channel expansion falls short of expectations, etc.