Incident Overview
The company released its 2024 interim report. In the first half of 2024, the company achieved revenue of 8.908 billion yuan, +0.34% year-on-year; net profit to mother was 0.896 billion yuan, -2.97% YoY; net profit not returned to mother was 0.781 billion yuan, or -6.76% YoY. On a quarterly basis, Q2 revenue for a single quarter was 4.558 billion yuan, -7.44% YoY; net profit to mother was 0.476 billion yuan, -9.07% YoY. In terms of cash flow, net cash flow from operating activities in the first half of 2024 was 0.637 billion yuan, -18.10% year-on-year.
Analytical judgment:
Revenue side: Continuing to deepen the transformation of the whole family, integrating the opening of large stores to further accelerate weak demand, which led to a decline in revenue in the second quarter, and the transformation of the whole family continued to advance. Product-side functional sofas have achieved the full popularization of high, medium, and low market products through three generations of zero-wall technology. Custom Home was the first to launch the 698 package, including the upgrade of PET skin-like cabinet door panels, and launched “high quality and low price” skin-feeling PET (998) and environmentally friendly electrostatic powder (1399, and 998/1198 under the policy) products, which went down to the lowest price in the industry to provide cost-effective products. In terms of overall transformation, the competitiveness of terminal stores was enhanced through iterative optimization of product/store formats and changes in the entire enabling system, and customization and overall revenue growth in the first half of the year were achieved. The expansion of customized stores has further maintained medium- to high-speed growth, and integrated stores have further accelerated, with integrated stores accounting for more than 35% of total package sales; in addition, the retail side has further increased the coverage rate of warehousing services, which is expected to reach more than 50% by 2024.
Profit side: year-on-year increase in gross margin
2024H1's gross profit margin and net interest rate were 33.03% and 10.32%, respectively, +1.52pct and -0.08pct year over year; in terms of period expenses, 2024H1 had a period cost ratio of 21.27%, +2.07pct year over year, of which the sales/management/R&D/finance cost ratios were 17.02%/2.39%/2.03%/-0.17%, respectively, +0.92pct/+0.65pct (due to increased R&D investment such as logistics consumption and employee remuneration, respectively) ) /+0.29pct (due to a decrease in exchange gains and losses); the net interest rate fell slightly by 0.08pct to 10.32% under the combined effect.
2024Q2's gross profit margin and net interest rate were 32.98% and 10.79%, respectively, +1.97pct and +0.20pct; in terms of period expenses, the 2024Q2 period expense ratio was 20.61%, +3.22pct year over year, and -1.35pct month-on-month, of which the sales/management/R&D/finance expense ratios were 16.65%/1.50%/2.61%/-0.15% (due to a decrease in exchange earnings), respectively, +1.18pct/-0.94pct/+1.39pct/ +1.60pct (due to increased R&D investment such as logistics consumption and employee remuneration) /+0.29pct (due to a decrease in exchange gains and losses); net interest rate was +0.20pct to 10.79% year-on-year under comprehensive use.
Investment advice
Gujia Home Furnishing is a leader in the upholstered furniture industry. It always adheres to the three directions of “user enterprise, digital enterprise, and whole house enterprise”, and continues to lead industry transformation through “software+customization” integration. At the same time, the company strengthens the integration of excellent assets and focuses on endogenous development. We continue to be optimistic that the company will benefit from the home development strategy and promote the continuous increase in favorable national real estate policies and the increase in demand for home renovation. Considering the current weak overall demand in the industry, we adjusted our previous profit forecast. We expect the company's revenue for 2024-26 to be 19.788/21.767/23.944 billion yuan (previous value was 21.536/23.846/26.261 billion yuan), and EPS was 2.56/2.79/3.09 yuan (previous value was 2.81/3.17/3.55 yuan), corresponding to the closing price of 25.10 yuan/share on August 21, 2024, PE 13.67/12.51/11.31 times, maintaining the “buy” rating.
Risk warning
1) Changes in the international trade environment; 2) Downstream demand falls short of expectations; 3) Risk of sharp price increases for raw materials; 4) Risk of large exchange rate fluctuations.