Key points:

Event: The company released its report for the third quarter of 2024, and achieved relatively rapid growth in revenue and profit

The company released its report for the third quarter of 2024. In the first three quarters of 2024, it achieved operating income of 1.849 billion yuan, an increase of 27.13% over the previous year; realized net profit to mother of 0.431 billion yuan, an increase of 33.56% over the previous year; and realized deducted non-net profit of 0.391 billion yuan, an increase of 39.03% over the previous year. Looking at a single quarter, 2024Q3 achieved revenue of 0.642 billion yuan, an increase of 26.12% year on year; realized net profit of 0.146 billion yuan, an increase of 19.89% year on year; realized net profit deducted from mother of 0.134 billion yuan, an increase of 24.35% year on year.

Sales expenses rose due to increased share payment fees, and gross margin continued to grow in the third quarter

The gross margin for the first three quarters of 2024 was 33.72%, up 1.68pct year on year; gross margin for the third quarter was 34.65%, up 1.56pct year on year. The sales/management/R&D/finance expense ratios for the first three quarters of 2024 were 2.98%/3.43%/4.92%/-2.63%, respectively, +0.45/+0.06/-0.85/-0.17pct, respectively; the sales/management/R&D/finance expense ratios for the third quarter were 2.75%/3.22% /5, respectively.

14%/0.06%, +0.21/-1.28/-0.37/+3.64pct, respectively. The increase in the company's sales expenses was mainly due to an increase in the company's share payment expenses in the current period and an increase in market development business. The decrease in financial expenses was mainly due to an increase in interest income in the current period. The net return interest rate for the first three quarters of 2024 was 23.30%, up 1.12 pct year on year; the net return rate for the third quarter was 22.66%, down 1.18 pct year on year.

The recovery in the US consumer furniture market is expected to drive exports, and the company's channel layout in the US continues to deepen

From January to September 2024, the cumulative export value of China's furniture reached 107.95 billion yuan, with a cumulative year-on-year increase of 6.40%. Of these, the export value in September was 11.9 billion yuan, an increase of 0.10% year-on-year, and furniture exports continued to grow. During the same period, 89.89% of the company's products were exported to the US, and 84.18% of its products were exported from Vietnam. Vietnam's overall exports to the US continued to grow strongly. With the Federal Reserve announcing a 50 basis point cut in interest rates on September 18, local time, the US real estate market is expected to pick up, which in turn will drive furniture sales and create favorable conditions for exports from China's household enterprises. From January to September 2024, the company's top 10 customers were all US customers, 70% of which were retailers. Of these, the purchase volume of 9 customers all increased, ranging from 4.33% to 316.62%; 68 new customers were added, all of which were retailers, and 10 of them ranked among the “Top 100 Furniture Retailers in the US”.

The company's channel layout in the US market continues to expand. From January to September 2024, the number of retail customers in the US accounted for 81.75 of the total number of furniture customers in the US. Sales to US retailer customers accounted for 57.78% of the company's total revenue, and up to 64.27% of the total revenue in the US market.

Investment advice

On the one hand, as an important ODM supplier in the global smart electric sofa and smart electric bed industry, the company has long-term stable customer resources, sufficient overseas production capacity layout, perfect integrated supply chain layout, and market share is expected to continue to increase; on the other hand, the company actively promotes its own brand development and deepens channel construction through the “store-to-store” model, and its own brands are expected to contribute to increased performance. We expect the company's revenue for 2024-2026 to be 2.491/3.203/3.861 billion yuan, respectively, up 29.7%/28.6%/20.6% year on year; net profit to mother will be 0.546/0.658/0.765 billion yuan (previous value was 0.528/0.658/0.765 billion yuan), respectively, up 34.1%/20.5%/16.3% year on year. As of October 29, 2024, the total share capital and EPS corresponding to the closing market value were $3.28/3.96/4.60, respectively, and the corresponding PE was 18.37/15.25/13.12 times, respectively. Maintain a “buy” rating.

Risk warning

Macroeconomic risk, overseas market risk, international transportation price fluctuation risk, raw material price fluctuation risk, exchange rate fluctuation risk, management risk.