Key points of investment

Zhibang Home Furnishing Releases 24H1 Results

24H1 achieved revenue of 2.212 billion yuan (-3.85% YoY), net profit of 0.149 billion yuan (YoY -17.05%), and net profit without return to mother 0.126 billion (-23.74% YoY).

24Q2 achieved revenue of 1.392 billion yuan (-6.88% YoY), net profit of 0.102 billion yuan (YoY -20.54%), and net profit of 0.087 billion yuan (-28.63% YoY) after deducting non-return net profit.

The payment fee for 24H1 shares is 25.68 million (23H1 is 6.55 million). If this effect is excluded, H1's profit to mother is expected to drop by about 7% year-on-year.

Category side: the whole family is linked, the door and wall layout is accelerated

1) Kitchen cabinet 24H1 revenue 0.967 billion (-3.73% YoY), 24Q2 single quarter 0.65 billion (-5.13% YoY).

2) Wardrobe 24H1 revenue 0.928 billion (-5.86% YoY), 24Q2 single quarter 0.545 billion (YoY -14.04%) 3) Wooden Door 24H1 revenue 0.139 billion (YoY +6.88%), 24Q2 single quarter 0.094 billion (+4.76% YoY). The doorwall broke through the core technology of “oil to water” and promoted overall cost reduction in R&D, supply and marketing.

4) Buck the trend: the total number of 24H1 stores was 4,931 (net of opening +189 compared to Q1, +81 with wardrobes, +74 with wooden doors, +39 with cabinets).

Channel side: Overseas business is growing rapidly, and the bulk business is improving 1) Direct store 24H1 revenue 0.175 billion (-8.2% year-on-year, -26% year-on-year in 24Q2.

2) The 24H1 dealership's revenue was 1.167 billion yuan (-10.9% YoY), and the 24Q2 single quarter was -15.9%. The retail business performance was under pressure due to insufficient consumption power and poor completion affecting the flow of customers entering the store.

3) The bulk business 24H1 revenue was 0.606 billion (+8.2% year over year), 24Q2 was +7.8% year over quarter. It actively develops products such as age-appropriate apartments, enterprise apartments, talent apartments, and high engineering standards, and provides one-stop overall solutions for tooling materials to solve “cost reduction, efficiency improvement, and quality improvement”, and seek innovation in stability and innovation.

4) Overseas business 24H1 revenue 0.086 billion (+42.7% year over year), 24Q2 single quarter +24% year over year, BC-side dual-core drive, specialty stores opened in Indonesia, the Philippines and other countries. As the scale of overseas business increases, it is expected to drive a continuous improvement in gross margin levels.

Financial indicators: stable gross margin, increased expense ratio

1) Gross profit margin: The gross profit margin for the 24Q2 quarter was 36.37% (-0.38pct year on year), which remained stable even in the face of increased pressure from competition and the company actively reduced costs and increased efficiency;

2) Expense ratio: The cost rate was +3.39 pct year on year during the 24Q2 period, of which the sales expense ratio was +2.05pct year over year, and the investment in advertising and decoration costs and market service fees was large; the management+R&D cost ratio was +0.7 pct year over year, mainly due to share payments; the financial expense ratio was +0.65 pct year over year.

Profit forecasting and valuation

Zhibang Home Furnishing has a lot of room to explore new categories, new markets and finishes. The management is excellent and fully motivated. We look forward to continued optimization of the company's operations after the consumer environment improves. We expect the company to achieve operating income of 6.029 billion/6.441 billion/6.886 billion yuan in 2024-2026, growth of -1.44%/+6.84%/+6.91%, respectively, and net profit to mother of 0.566 billion/0.615 billion/0.664 billion, year-on-year, -4.96%/+8.79%/+7.96%, corresponding to the current PE7.31X/6.72X/6.22X, which will be maintained “Buy” rating.

Risk warning: Demand for real estate is sluggish, and price competition in the industry is intensifying.