The company released its 24-year report

24H1's revenue was 1.52 billion yuan, +0.9% YoY, net profit to mother 0.069 billion yuan, -9.1% YoY, net profit not attributable to mother 0.039 billion yuan, -9.4% YoY;

24Q2's revenue was 0.88 billion yuan, -5.6% YoY; net profit to mother was 0.033 billion yuan, -24.4% YoY; net profit not attributable to mother was 0.025 billion yuan, or -17.0% YoY.

Real estate investment was low in the first half of '24. The sales area and sales of newly built homes fell by more than 20% year on year. The second-hand housing market maintained a certain scale, driven by “price for volume,” but the downward pressure was still strong. We believe it had an impact on the company's revenue and profit growth.

Multi-category integration to promote the ultimate product development

By category, 24H1 overall kitchen cabinet revenue was 0.95 billion, +0.1% YoY, gross profit margin: -3.6pct; overall wardrobe 0.42 billion, YoY -0.7%, gross profit margin 28.0%, YoY +0.2pct; wooden doors: 0.092 billion, YoY +3.0%, gross profit margin 3.9%, YoY -0.04pct; Other revenue 0.018 billion, +75.7% YoY, gross profit margin 25.3%, YoY +6.2pct.

Starting from user needs, the company has stepped up product research and development efforts, continuously exploring and introducing diverse basic material systems, from classic and stable chipboard and medium fibreboard, to environmentally friendly and innovative blue bamboo boards in 2023, to high-end customized solid wood core boards and multi-layer board cabinets in 2024, continuing to enrich the product line. In 2024, the company released a large single product - luxury car paint products, which will further consolidate the differentiation and advantages of the company's paint products and enhance the market competitiveness and user experience in all aspects.

Retail sales are under pressure, bulk is stable, and overseas growth is high

By channel, 24H1 direct-run store revenue was 0.01 billion, -72.4%, gross profit margin: 49.2%, year-on-year -11.9pct; dealership revenue 0.68 billion, year-on-year -12.3%, gross profit margin 31.3%, year-on-year -3.0 pct; bulk revenue 0.6 billion, year-on-year +15.1%, gross profit margin 15.8%, year-on-year +2.2pct; overseas revenue 0.17 billion, gross profit margin 28.5%, year-on-year 0.3+pct .

1) Distribution: The company further deepened its retail strategy of 140 (that is, 1 refers to stores, 4 refers to online marketing/home improvement/bag/office reform, 0 refers to assembly), and promotes multi-channel multi-channel layout in the first half of 2024. The home improvement business increased by about 45% year-on-year in the first half of 2024; in terms of branches, as of the end of 24H1, the number of gold medal kitchen cabinets/gold medal wooden doors/finished buildings/balcony/bathroom/manio had 1664/1141/667/668/668/668 stores 96/163, compared to the beginning of the year -45/-11/+7/+27/+7/+15

2) Large scale: Facing the current real estate market, the company continues to sign strategic cooperation with high-quality real estate on the premise of risk prevention and control to further explore signed strategies and rapidly increase new strategies; at the same time, the company continues to rely on brands and their resource advantages to bring categories such as wooden doors and kitchen appliances into hardcover collection.

3) Overseas: In response to market differences in different regions, the company determined a differentiated business development model and production and delivery guarantee logic. It plans to invest in a manufacturing base in Thailand to enable large goods to be supplied from the Thai base, control production costs, and guarantee small goods through territorial satellite factories to enhance territorial service capabilities.

Gross margin is affected by changes in revenue structure

24Q2 gross profit margin was 25.7%, year-on-year -2.0pct, sales/management/R&D/finance expense ratios were 10.6%/5.8%/6.3%/0.01%, year-on-year, -2.0pct/+1.0pct/+0.6pct/+0.2pct, net profit margin was 3.76%, year-on-year -0.9pct. Among them, the decline in gross margin was mainly due to changes in the revenue structure, and the increase in financial expenses was mainly due to an increase in cost-based interest expenses due to the gradual completion and consolidation of convertible bond raising projects.

Adjust profit forecasts to maintain “buy” ratings

According to the 2016 Mid-Year Report, considering that current domestic demand is still weak and real estate data is still sluggish, we adjusted the profit forecast. The company's net profit for 24-26 is 0.29/0.32/0.36 billion yuan (previous value was 0.351/0.411/0.428 billion yuan), respectively, and the corresponding PE is 9/8/7X, respectively.

Risk warning: Real estate sales continue to be sluggish, domestic demand continues to weaken, industry competition intensifies, household growth falls short of expectations, etc.