Key points of investment

Gujia Home Releases Restricted Stock Incentive Plan (Draft) and Election of New Chairman 1) 2024 Restricted Stock Incentive Plan (Draft): It is proposed to grant a total of 9.835 million restricted shares to 84 core business lines, accounting for 1.2% of the share capital; the grant price is 11.84 yuan/share 9.20, closing price is 22.6 yuan, with a discount rate of 52%).

2) The chairman, Mr. Gu Jiangsheng, recently resigned, and the board of directors elected Mr. Kwong Guangxiong as the new chairman of the company.

Interpretation of the announcement: Strengthening the binding of middle level interests and setting steady development goals 1) The performance assessment target for this restricted stock incentive is: net profit for 2025-2027 is not less than 100%/105%/110.25% of the average net profit for 2021-2023 (1.827 billion yuan, return to parent). Judging from the assessment target setting, the uncertain factors of the macro environment are combined. We believe that the core of this incentive is to strengthen the binding of middle management, and we expect the company to maintain stronger confidence in growth.

2) Expense amortization: Total 0.106 billion yuan, estimated confirmed costs of 0.12/0.48/0.03/0.013/0.003 billion yuan in 2024-2028, respectively.

3) Chairman change: Mr. Kuang is the vice president & CFO of Yingfeng Group. He has worked as CFO in various departments in the US and joined Gu Jia as a director in February 2024. According to the previous announcement, we believe that even if the new chairman is replaced, Li Donglai will maintain independence in subsequent management decisions as a core member of management.

Gold 9 Silver 10+ trade-in is expected to catalyze demand

1) Since the beginning of '24, the Gu Family has continued to increase marketing efforts on the domestic trade side. At the same time, it has achieved effective product cost reduction through the middle, back office and supply chain efficiency. The whole family has launched 698 packages, adjusted prices and provided price subsidies for some products, and launched a “local package/micro conversion to new and discarded” model for the stock market.

2) The traditional home improvement season is gradually entering the golden, nine, and silver peak season. Early orders that were delayed due to spending power are expected to be reflected.

3) In addition, since August, Hubei, Shanghai, Shenzhen and other provinces and cities have successively issued trade-in subsidy rules, with strong support (for example, subsidies of 2000-3000 yuan for single furniture products, 0.02-0.03 million yuan per contract amount, etc.), and subsequent stimulation of software and customized consumption can be expected.

Profit forecasting and valuation

Gu Jia continues to increase marketing efforts on the domestic trade side, while providing support for effective cost reduction in the central back-office and supply chain, and expects improvements in domestic trade operations; foreign trade will continue to expand overseas production capacity and increase the share of new businesses such as SPO and cross-border e-commerce. Leading household businesses that are optimistic about growing both internally and externally have bucked the trend. We expect to achieve revenue of 19.522/20.841/22.333 billion in 24/25/26, +1.61%/+6.76%/+7.16% YoY, net profit 2.008/2.133/2.284 billion, +0.09%/+6.21%/+7.12% YoY. The PE corresponding to the current market value is 9.25/8.71/8.13 X, maintaining a buying rating.

Risk warning

Risk of fluctuations in consumer demand; increased competition in the industry; progress in promoting the big-store model falls short of expectations, etc.