Introduction to this report:
The company's performance is in line with expectations, the medium- to long-term strategic path and growth path are clear, and the short-term increase in executive holdings shows confidence in development.
Key points of investment:
Adjust profit expectations and maintain an “gain” rating. Considering the company's recent business situation and uncertainty in the external environment, we lowered the company's profit forecast. The company's EPS for 2024-2026 is 2.47/2.82/3.10 yuan (previous value: 2.72/3.26/3.90 yuan). The company has outstanding advantages in merging into multiple categories and has excellent management and governance capabilities. Refer to the comparable company, which gave 15 XPE in 2025, lowered the target price to 42.24 yuan, and maintained the “gain” rating.
Revenue was stable, and the sofa category bucked the trend. 2024H1's total revenue was +0.3% year-on-year to 8.91 billion. Excluding the impact of the divestment of the Tianxi faction, the actual revenue growth rate is expected to be higher than the apparent rate.
By category, 2024H1 sofa/soft bed and mattress/ancillary products/custom furniture/information technology services achieved revenue of 49.4/15.3/1.27/0.49/0.32 billion, compared to +14.2%/-19.9%/-17.4%/+24.8%/-22.5%. The sofa and custom furniture business performed well, and the sofa business is expected to be driven mainly by export sales. By region, domestic sales revenue was -9.8% to 4.72 billion, and export revenue was +12.6% to 3.89 billion. The La-Z-Boy brand is expected to maintain about 20% growth, and the Natuzzi brand declined slightly.
Gross margin has been growing steadily, and expense ratios have increased. 2024Q2's gross sales margin was 33.0%, +2.0pct year over year, -0.1pct month-on-month; deducted non-net profit margin 8.9%, -1.2pct yoy, +0.3pct month-on-month. The projected year-on-year improvement in gross margin is related to fluctuations in raw material prices and product structure optimization. In terms of cost ratio, 2024Q2's management/R&D/sales/finance cost ratio was -0.9pct/+1.4pct/+1.2pct to 1.5%/2.6%/16.6%/-0.1% year-on-year. Among them, the increase in the financial expense ratio was mainly due to a decrease in exchange benefits, the increase in R&D cost ratio was mainly due to an increase in R&D investment such as material consumption and employee remuneration, and the increase in the company's comprehensive cost ratio was lower than the gross profit margin.
The strategic path is clear, and executives are vigorously increasing their holdings. In the short term, the offline export business remains booming, and the online business is gradually becoming profitable. The domestic sales business is also expected to pick up in the third quarter with the help of 816 Gu Jiari. Tactically, the company focuses on improving internal efficiency, seizing structural growth (cross-border e-commerce and customized business), and actively expanding the software business. In the long run, the company firmly implements globalization, domestic trade and retail transformation, and the overall strategy, and the strategic direction and growth path are clear.
In addition, Mr. Li Donglai, a director and senior manager of the company, recently planned to increase his A-share holdings by 0.15-0.22 billion yuan, demonstrating confidence in long-term development.
Risk warning: Prices of raw materials continue to rise, downstream consumer demand falls short of expectations, etc.