Incident: Gujia Home Furnishing released its 2024 mid-year report. In the first half of 2024, revenue was 8.908 billion yuan, +0.34% year over year; net profit to mother was 0.896 billion yuan, -2.97% year over year; after deducting non-net profit of 0.781 billion yuan, -6.76% year over year.
Looking at a single quarter, Q2 revenue was 4.558 billion yuan, -7.44% year over year; net profit to mother was 0.476 billion yuan, -9.07% year over year; after deducting non-net profit of 0.405 billion yuan, -18.45% year over year. Considering the impact of mattress anti-dumping and Tianxi divestment, revenue performance is better under the same caliber.
Gross margin increased, and overall costs increased slightly. In terms of profitability, 2024H1 achieved a gross profit margin of 33.03% (+1.52pct.) , net profit margin to mother 10.06% (-0.34pct.); 24Q2 gross sales margin was 32.98% (+1.97pct.) in a single quarter , net profit margin 10.44% (-0.19pct.) Overseas production capacity bases such as Vietnam have reduced costs and improved efficiency, driving overall profits to improve. In terms of period expenses, 2024H1, the company's sales, management, R&D, and financial expenses rates were 17.02%, 2.39%, 2.03%, and -0.17%, respectively, +0.92, +0.21, +0.65, and +0.29pct, respectively. Financial expenses are mainly affected by changes in exchange gains and losses.
The growth rate of domestic and foreign trade declined sequentially, and we are focusing on a steady recovery in the second half of the year. By channel, 1) Domestic sales: Q2 declined year-on-year, focusing on channel restructuring. 2024H1, domestic sales revenue of 4.72 billion yuan, YoY -9.8%, gross profit margin 37.82% (+1.27pct.). We estimate a double-digit decline in domestic sales in 24Q2. 2) Export sales: Q2 single-digit growth, and profits continue to recover. 2024H1, export revenue of 3.89 billion yuan, YoY +12.6%, gross profit margin 26.04% (+2.87pct.). We estimate single-digit growth in foreign trade in 24Q2.
The “whole” operation is firm, and the customized business is growing steadily. 1) Sofa: 2024H1's revenue was 4.94 billion yuan, +14.2% year-on-year, with a gross profit margin of 35.14% (+1.41pct.). Looking at a single quarter, we estimate that the 24Q2 sofa business will grow by a high number of units, mainly driven by foreign trade. 2) Bedroom products: 2024H1 revenue 1.53 billion yuan, YoY -19.9%, gross profit margin 40.5% (+5.16pct.) We estimate that both domestic and foreign sales have declined. 3) Integrated accessories: 2024H1 revenue 1.27 billion yuan, YoY -17.4%, gross profit margin 30.6% (+3.01pct.). 4) Customized products: 2024H1 revenue 0.49 billion yuan, YoY +24.9%, gross profit margin 35.14% (+6.85pct.). The company is determined to operate “as a whole”. In terms of overall transformation, the entire customized store expanded at medium to high speed in the first half of the year, and the opening of integrated stores accelerated, accounting for more than 35% of the total package sales in integrated stores.
Adhere to the “one, two wings” strategy, and balanced development of software category operation innovation and integrated overall strategy. In 2024, the company determined the transformation of domestic trade to offline “whole” operations. The software category mainly revolved around large guest restaurants and large bedrooms with the main strategy of upgrading the store format and optimizing the product matrix, clearly aiming to achieve the “first market share within the border” of already entered shopping malls and markets; foreign trade was in the direction of “multi-nationalized/localized value chain integration”.
Investment advice: Gujia Home Furnishing is a leading domestic soft home appliance. The product, brand, and channel moat is deep. With the upgrading of the company's channel structure and the advancement of the overall strategy, the resilience of the leader is expected to be highlighted. We expect the company to achieve revenue of 20.08, 22.44, and 24.94 billion yuan in 2024-2026, with year-on-year increases of 4.5%, 11.8%, and 11.1%, respectively, and net profit to mother of 2.076, 2.347, and 2.63 billion yuan, respectively, with year-on-year increases of 3.5%, 13.1%, and 12%, respectively (consumer demand is under pressure, profit forecasts are adjusted. The previous forecast values for 2024-2026 are 2.26, 2.535, and 2.845 billion yuan), EPS is 2.53, 2.86, 3.2 yuan, maintaining the “buy” rating.
Risk warning: Market competition increases risk, dealer management risk, raw material price fluctuation risk, channel expansion falls short of expectations, etc.