[Core Conclusion] The company is a leading cross-border e-commerce enterprise in the home furnishing category. It sells to developed countries in Europe and the US under its own brand. It has the ability to operate the entire cross-border e-commerce chain. It has a clear strategy for subsequent market share in Europe and America, and is expected to maintain rapid growth in the future. We expect the company's net profit to be 4.67/6.17/770 million yuan in 24-26, +13.0%/+32.3%/+24.8% year-on-year; give Zhi Ou Technology a 20-fold PE valuation in 2024, corresponding to a target price of 23.25 yuan/share, and give it an “increase in holdings” rating.

Home cross-border e-commerce industry: Big industries can nurture big companies. 1) Large industry, continuous expansion. The size of the B2C e-commerce market for home furnishings in the US and Europe in 2023 is US$74.8 and 85.9 billion, respectively. Factors such as the rise of emerging cross-border e-commerce platforms in China, high product cost performance, and the booming development of overseas infrastructure warehouses are expected to drive the industry to continue to expand. 2) In the traditional channel development system, the overseas home furnishing market has developed large global companies such as Ikea and Ashley, with annual revenue exceeding 10 billion US dollars. We believe that online also has the conditions to create such a large company: a) Home furnishing is an industry with a small number of categories, and multiple product lines can be developed and expanded; b) the flywheel effect of platforms such as Amazon continues to expand its scale, and sellers can enjoy platform traffic dividends. At the same time, it is relatively smooth to expand the region along with the platform.

Company advantage: Amazon's leading seller, capable of operating the entire cross-border e-commerce chain, and continuous optimization.

1) Deeply involved in Amazon and accumulated account and top listing resources. The company ranks first in the home furniture category on Amazon Germany/France/UK/Italy; the company already has multiple leading listings, with 314/340/91 ASINs in the German/France/US Amazon TOP20 categories; 2) Supply chain integration+strong R&D capabilities support multiple categories, multiple products, and small orders. The company currently has 300+ categories, 3000+ SPU, a rich product matrix, and the prototype of an “online” Ikea is already showing.

Short-term driving force: Strengthening the US, increasing the contribution of new channels and new markets. US Line optimization measures: 1) Strengthen the layout of overseas warehouses to increase the spontaneous share (the spontaneous shipping rate is 7 to 10 pcts lower than FBA) and reduce costs. 2) Supply chain migration avoids tariffs. The company plans to increase the proportion of shipments from Southeast Asia to the US to 20% in '24. We estimate that this is expected to increase gross margin by 0.97 pct. 3) Strengthen serialization+localization layout on the product side.

Risk warning: rising sea freight rates, exchange rate fluctuations, international trade frictions, increased industry competition, etc.