Key points of investment

Zhibang Home Furnishing Releases 24Q3 Results

24Q1-Q3 achieved revenue of 3.675 billion yuan (-6.46% YoY), net profit attributable to mother 0.266 billion (YoY -23.80%), and net profit without return to mother 0.233 billion (-28.32% YoY).

The 24Q3 quarter achieved revenue of 1.463 billion yuan (-10.14% YoY), net profit of 0.117 billion yuan (YoY -0.93%), and net profit of 0.107 billion yuan (-3.05% YoY) after deducting non-return net profit.

Door walls continue to advance at an accelerated pace, and traditional category channels are optimized

1) Kitchen cabinet revenue of 24Q1-Q3 was 1.662 billion (-5% YoY), and 24Q3 was 0.695 billion in a single quarter (-7% YoY).

2) Wardrobe 24Q1-Q3 revenue 1.504 billion (-10% YoY), 24Q3 single quarter 0.576 billion (-16% YoY). 3) The 24Q1-Q3 revenue of wooden doors was 0.24 billion (+0.5% year over year), and 24Q3 was 0.101 billion yuan in a single quarter (-7% year over year). Door walls broke through the core technology of “oil to water” and promoted overall cost reduction in R&D, production, supply and marketing. 4) Channel construction:

The total number of 24Q1-Q3 stores is 4,579 (4 compared to the end of 23, plus 137 wooden doors, 29 wardrobes, 97 cabinets), and the number of doorwall stores continues to accelerate.

Stable bulk business, high growth in overseas business

1) Direct stores earned 0.253 billion in 24Q1-Q3 (-16% YoY) and -30% YoY in 24Q3. 2) Dealership revenue of 24Q1-Q3 was 1.917 billion (-12% year over year), and 24Q3 was -13% year over year. 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 24Q1-Q3 bulk business revenue was 1.105 billion yuan (+1% year over year), 24Q3 was -6.7% year-on-quarter. It actively developed products such as age-appropriate apartments, enterprise apartments, talent apartments, and high engineering standards, and provided a one-stop overall solution for tooling materials to solve “cost reduction, efficiency improvement, and quality improvement”, and seek innovation in stability and innovation. 4) Overseas business revenue of 24Q1-Q3 was 0.131 billion (+35% year over year), 24Q3 was +22.9% year over year, BC-side dual-core drive, and specialty stores opened in Indonesia, the Philippines and other countries.

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

Since August, many provinces and cities have successively issued trade-in subsidy rules. The support has been strong (for example, the subsidy for a single piece of furniture product is mostly 2,000 yuan, such as 0.02-0.03 million yuan for whole house decoration according to the contract amount, etc.), and it has already been seen that some regions have had good driving effects in October. The home trade-in subsidy is a gradual process. Good samples and positive feedback will encourage more dealers to participate, combined with the Double 11 promotion and the catalytic December 31 deadline. We determine that 24Q4 home furnishing companies' front-end orders are more likely to return. At the same time, government restrictions on participating merchants in compliance operations will also help increase the concentration of leading brands.

Financial indicators: Decrease in gross margin, increase in expense ratio

1) Gross profit margin: 24Q3 gross profit margin of 37.04% in a single quarter (-3.65pct year on year). Facing fierce market competition, we expect the company's sales side price concessions to increase;

2) Expense ratio: The cost rate was +3.54 ct year over year during the 24Q3 period, of which the sales expense ratio was +3.48 pct year over year. We expect a large investment in market service fees and advertising expenses; the management+R&D cost ratio was -0.35 pct year over year; and the financial cost ratio was +0.41 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 5.789 billion/6.185 billion/6.613 billion yuan in 2024-2026, respectively, -5.36%/+6.84%/+6.92%, net profit to mother 0.5 billion/0.533 billion/0.571 billion, respectively, -16%/+6.72%/+6.99%, corresponding to the current PE12.54X/11.75X/10.98X, maintaining” “Buy” rating.

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