The company's recent situation

Recently, the company released the “Gujia Home Furnishing Co., Ltd. 2024 Restricted Stock Incentive Plan (Draft)”. The number of restricted shares to be awarded is 9.835 million shares, accounting for 1.2% of the company's total share capital of 0.82 billion shares. The incentive plan targets the company's core backbone, with a total grant price of 11.8 yuan/share, which is 47.8% off the company's closing price on September 20.

reviews

1. The assessment target is a CAGR 5% increase in profit due to mother in the three years 2025-2027. The conditions for lifting the sales restrictions for this incentive are: based on the three-year average net profit from 2021 to 2023 (excluding impairment of goodwill), the net profit for 2025-2027 is not less than the underlying growth of 0%/5%/10.3%, respectively. The total number of incentives this time was 84 people, all of whom were core members of the company. We believe that the introduction of the company's stock incentive plan will help motivate the company's core employees, improve the efficiency of the company's management, and demonstrate confidence in the company's steady operation and development in the future.

2. With further integration between Yingfeng and Gu Jia, we expect to maintain the stability of the management team. Recently, Mr. Kwong Kwong Hung succeeded Gu Jiangsheng, the former chairman of the company, as chairman and other positions. Yingfeng and Gu Jia are further integrated. According to previous disclosure by Yingfeng Group, we expect this change to maintain the stability of the company's original management team. In the long run, it will help the company create synergy effects in various fields and deepen the overall integrated strategy.

3. Cut interest rates on export sales, trade in domestic sales, and pay attention to changes in domestic and foreign demand. 1) In terms of export sales, European and American countries have cut interest rates one after another. We believe that demand for overseas real estate is expected to pick up as interest rates fall, and the capacity utilization rate of the company's factories in Vietnam, the US, and Mexico is expected to continue to increase, driving both export revenue and profit growth. 2) In terms of domestic sales, domestic demand pressure still exists. The company recently launched a “trade-in season” campaign to focus on the implementation results of follow-up activities.

Profit forecasting and valuation

Considering weak domestic demand and changes in revenue structure, the 2024/2025 profit forecast was lowered by 8%/12% to 2.01/2.22 billion yuan. The current stock price corresponds to 9/8 times P/E for 2024/2025, maintaining the outperforming industry rating. Considering the declining risk appetite in the market, we lowered our target price by 15% to 34 yuan, corresponding to 14/13 times P/E in 2024/2025, with 50% upside compared to the current stock price.

risks

Competition in the industry intensified, store expansion fell short of expectations, and the decline in real estate sentiment exceeded expectations.