Incident: On the evening of July 26, the company issued an announcement. Based on confidence in the company's future development prospects and recognition of the company's value, President Li Donglai plans to increase his holdings of the company's A shares through centralized bidding transactions in the secondary market. The amount of shares will be increased by 0.15-0.22 billion yuan. The funding source is own funds and/or self-financing, and the increase will be completed within 3 months from the next day, with no price range. As of today, Mr. Li Donglai holds 2.36% of the company's shares.
Domestic sales: retail transformation, overall strategy, forward-looking layout update, market reform. On July 25, the National Development and Reform Commission and the Ministry of Finance issued a notice on “Certain Measures to Strengthen Support for Large-scale Equipment Renewal and Trade-in of Consumer Goods”, which mentions focusing on supporting the purchase of items and materials for partial renovation such as old house decoration, kitchen and bathroom, and home aging adaptation. The company forwardly lays out the stock market, launches “worry-free renewal services”, etc., and implements standardization of recycling, which is expected to benefit from the release of household demand suppression. In addition, through channel evolution+purification and restructuring, the company invests in integrated channel attacks and actively expands leading equipment companies. It is expected that the ratio of integrated stores+integrated stores will continue to increase, the proportion of customized+software integrated stores will further increase, and the overall number of stores in the series will continue to expand steadily.
Export sales: The globalization of leading software companies is accelerating, and export sales are expected to continue to be beautiful. Export sales are showing strong results, 24Q1 growth is expected to accelerate, short-term production capacity relocation affects mattress revenue, and 24H2 is expected to improve quarterly as the slope returns to normal. The company binds major customers with leading supply and delivery capabilities. Costco broke through offline chair & bed cooperation for the first time. SPO and cross-border e-commerce are expanding smoothly, and it is expected to maintain beautiful growth. In December '23, the company successfully opened its multi-category, one-stop shop in Mumbai, India. Global production & operation capabilities continued to be verified, and overseas markets are expected to contribute more rapidly. Furthermore, the production efficiency of Vietnamese and US factories is gradually improving, and the net operating margin is expected to increase steadily, and continuous improvement can be expected in the future.
Profit forecast: The company's dividend ratio will remain above 50% in 2019-2023. Assuming that the dividend rate in 2024 is 50%, corresponding to the current dividend rate of more than 5%. We expect net profit to be 2.11 billion yuan, 2.31 billion yuan, and 2.54 billion yuan respectively in 2024-2026, corresponding to PE of 9.0X, 8.2X, and 7.5X, maintaining a “buy” rating.
Risk warning: Real estate recovery fell short of expectations, consumption recovery fell short of expectations, and progress on both sides fell short of expectations.