Key points of investment
Gujia Home Furnishing Releases 24H1 Results
24H1's revenue was 8.908 billion (YoY +0.34%, same below), net profit of 0.896 billion (-2.97%) to mother, minus 0.781 billion (-6.76%) of non-profit. 24Q2 single-quarter revenue of 4.56 billion (-7.44%), net profit of 0.476 billion (-9.07%) to mother, net profit of 0.405 billion (-18.45%), net of non-profit 0.405 billion (-18.45%).
Revenue side: The company divested Tianxi on 23.10.31, and the foreign mattress business was affected by anti-dumping, which had a certain impact on the H1 growth rate.
Profit side: 24H1 exchange earnings were 0.033 billion (23H1 was 0.064 billion), 24Q2 financial expenses were 0.079 billion more than 23Q2, and profit performance is expected to be better after restoration.
Domestic sales: Marketing activities are intensifying, and gross margin is still increasing. We expect a trade-in of an additional 24H1 domestic sales revenue of 4.72 billion (-9.8% YoY) and a gross profit margin of 37.82% (+1.27pct year over year).
1. Since the beginning of '24, Gujia has continued to increase marketing efforts on the domestic trade side, while effectively reducing product costs through improving the efficiency of the middle back office and supply chain. In March, the “Gujia Home Furnishing and Welfare Renovation Project” was launched, with excellent prices, such as 698 yuan/㎡ wardrobe and cupboard, 13,999 yuan for a two-bedroom package, and a 12,999 yuan two-bedroom package. The 816 promotion campaign released three new policy benefits, “full year warranty”, “90-day no-reason return and exchange”, and “7-day lightning delivery for some products”. This is the result of strong capacity allocation capabilities, efficient delivery supply chains, and extreme cost of scale advantages. This is the result achieved by the company's domestic trade in promoting warehouse distribution and retail operation reforms over the years 2) Integrated launch of the 698 package to adjust prices and price subsidies for some products. As a result, 24H1 customization achieved relatively rapid growth and revenue. 0.49 billion (+25%).
3) For the stock market, launch the “local installation/micro replacement of new and discarded” model. On July 25, the two departments issued “Certain Measures to Strengthen Support for Large-scale Equipment Upgrades and Consumer Goods Trade-In”. In August, Hubei, Qinghai, Zhejiang and other provinces all have subsidy measures for trade-in, which is expected to drive an improvement in demand.
Insufficient spending power is an important factor currently limiting household demand. The company is actively improving the cost performance ratio of products. At the same time, this round of trade-in measures has clear funding sources, and it is expected that the preferential treatment given to consumers will be strong, and the economy is expected to rise steadily in the future.
Export sales: lean manufacturing, overseas production capacity expansion
24H1 export revenue of 3.9 billion (YoY +12.6%), gross profit margin 26.04% (YoY +2.86pct).
1) Vigorously develop the supermarket business, and achieve breakthroughs in cooperation with Costco and others (increase offline chair and bed cooperation).
2) Further increase the share of SPO business and enhance the supply chain's ability to deliver quickly.
3) Cross-border e-commerce business development has been accelerated, and a complete market insight, product planning, channel operation, user experience, and supply chain system has been established. Online retail platforms such as Amazon, Wayfair, Shopify, and Temu have been deployed in the US, and there are multiple three-party overseas warehouse layouts, covering delivery across the US.
4) Actively explore independent brands overseas and set up benchmark brand stores for finished products in India, Vietnam, Thailand, Uzbekistan, Kazakhstan and other countries.
Release plans to increase executive holdings to strengthen confidence
On July 27, in order to promote the company's action plan to “improve quality, increase efficiency and return”, based on confidence in the company's future development prospects and recognition of the company's value, the company's president, Mr. Li Donglai plans to increase his shareholding amount by 1.5 to 0.22 billion yuan. Based on the closing market value of 19.06 billion on July 26, the corresponding shares were 0.79% to 1.15% (Mr. Li Donglai directly and indirectly held 2.36% of the total shares as of the announcement date). The method of increasing holdings is centralized bidding in the secondary market.
Financial indicators
1) The gross profit margin for the 24Q2 single quarter was 33% (year-on-year +1.97pct, same below), with a period expense ratio of 20.61% (+3.22pct), of which the sales expense ratio was +1.18pct, the management+R&D expense ratio increased by 0.45pct, and the financial expenses ratio increased by 1.6pct. 2) 24Q2 net operating cash flow 0.796 billion (+27.41%).
Profit forecasting and valuation
With an integrated two-wing dual-core strategy, domestic trade continues to be optimistic that a number of welfare measures will drive operational improvements, functional sofas & custom & beds have high potential, advance the layout of overseas production capacity in foreign trade, and reduce operating risks. We expect to achieve revenue of 19.522/20.841/22.333 billion in 24/25/26, +1.61%/+6.76%/+7.16% year over year, net profit to mother of 2.008/2.133/2.284 billion, +0.09%/+7.12% YoY. The PE corresponding to the current market value is 10.27/9.67/9.03 X, maintaining a buying rating.
Risk warning
Risk of fluctuations in consumer demand; increased competition in the industry; progress in promoting the big-store model falls short of expectations, etc.