内贸疲软拖累Q3 营收，外贸预计延续增长态势。1）内贸：公司在产品端高举高打，纵深推进一体化整家战略，三季度受国内需求疲软拖累，内贸业务预计承压。展望Q4，公司根据全国各地“以旧换新”政策，因地制宜推出了相应优惠举措落地，或持续激发当地家居市场消费活力。2）外贸：公司稳步推进线下/线上零售商业务，深度绑定大客户，现已在美国本土布局亚马逊、wayfair、shopify、Temu 等线上零售平台，24Q3 营收端或延续增长。Matters:
The company announced its 2024 three-quarter report. In the first three quarters, the company achieved revenue/net profit after deduction of 13.8/1.36/1.22 billion yuan, YoY -2.4%/-9.5%/-10.7%; 24Q3 achieved revenue/net profit to mother/net profit of 4.89/0.46/0.44 billion yuan, YoY -6.9%/-16.9%.
Commentary:
Weak domestic trade dragged down Q3 revenue, and foreign trade is expected to continue to grow. 1) Domestic trade: The company held high on the product side and promoted an integrated overall strategy in depth. The third quarter was hampered by weak domestic demand, and domestic trade business is expected to be under pressure. Looking ahead to Q4, in accordance with “trade-in” policies across the country, the company introduced corresponding preferential measures according to local conditions, or continue to stimulate consumption vitality in the local home furnishing market. 2) Foreign trade: The company is steadily promoting offline/online retail business and is deeply tied to major customers. It has now deployed online retail platforms such as Amazon, Wayfair, Shopify, and Temu in the US, and the 24Q3 revenue side may continue to grow.
Profitability was under phased pressure, and the cost ratio improved markedly during the period. In 24Q3, the company achieved a gross profit margin of 29.8%, -4.0pcts/month-on-month -3.2pcts. We speculate that this is due to the increase in the share of low-margin foreign trade business. On the cost side, the company achieved a sales/management/finance expense ratio of 14.0%/1.7%/0.7% in the third quarter, -2.4/-0.4/+0.1pcts year-on-year. Taken together, the company achieved a net profit margin of 9.5% /-1.5pcts in 24Q3.
Management has taken up new positions and embarked on a new journey, and is confident in introducing equity incentives. On the management side, the company elected director Mr. Kuang Guangxiong as the chairman (former vice president of Yingfeng Group, financial director of Midea Central Air Conditioning, etc.), and also appointed Xu Gang/Liu Yingzhang/Peng Xuanzhi/Yao Bin as the company's vice presidents, in charge of the bedroom business/service division/cafeteria/e-commerce division, which is expected to continue to stimulate the company's operating vitality. Furthermore, in September 2024, the company launched an equity incentive plan, which deeply binds 84 core cadres, which is expected to strengthen confidence in long-term development.
Investment advice: The company is a leader in upholstered furniture, and the pace of internal and external expansion is steady. As the trade-in policy continues to be promoted, terminal demand is expected to pick up. Considering that downstream demand is still under pressure, we expect a profit of 1.871/2.061/2.239 billion yuan for 24/25/26 (2.018/2.173/2.332 billion yuan before 24/25/26), and the corresponding PE is 15/13/12X. Referring to comparable company valuations, the company was given a 25-year PE of 17X, corresponding to a target price of 42.62 yuan/share, maintaining a “strong” rating.
Risk warning: Macroeconomics affects demand; risk of fluctuations in raw material prices; channel expansion falls short of expectations, etc.
