Key points of investment
Sophia releases 2024Q1 performance forecast
According to the company's preliminary estimates, 24Q1's revenue is expected to be +10-20% year-on-year, with a median of 2,075 million (+15%); net profit due to mother +50 to 80% (in sync with non-calibration), with a median of 172 million (+65%); if estimated by the median, 24Q1 company's net profit margin reached 8.3% (2.51 pct higher than 23Q1), and the performance exceeded market expectations.
Profit side: Cost reduction and fee control have achieved remarkable results
24Q1 continued its cost reduction and efficiency measures since last year, and strictly controlled expenses (23Q4 sales expense ratio -0.9 pct year over year, management+R&D cost ratio -0.8 pct year on year). At the same time, we estimate the company's overall improvement in plate utilization, production efficiency, and supply chain efficiency in 23, which is still helping 24Q1's profit margin performance.
Revenue side: promotion of multiple brands as a whole, full channel development
24Q1's Milana brand and assembly channels are growing strongly. Combined with the impact of the Spring Festival misalignment, production orders were more adequate year over year, and the revenue side grew rapidly.
Looking ahead to the full year of 2024, there is still plenty of growth momentum, and I am optimistic that the overall package will continue to grow and resonate with multiple brands.
1. The overall contract continues to exceed expectations:
1) In December '23, Sophia's Integrated Assembly Division held cooperative assembly successful model exchange meetings in Wuxi and Guangzhou respectively. The on-site contract target achievement rate was 166%/133%.
2) Previously, on November 3, '23, Sophia Integrated Assembly had successfully achieved its annual performance target, 2 months earlier.
3) The 24-year integrated assembly is expected to add the layout of the cabinet category to promote the implementation of cabinet products in terminals, and it is optimistic that the 24-year assembly model will continue to grow rapidly.
2. The category integration of various brands continues to drive single value:
1) Driven by the integrated package, Sophia's main brand has a lot of room for growth in categories such as cabinets and wooden doors.
2) As an important gripper in the sinking market, Milana still has plenty of room to attract investment and build stores in the sinking market. It is expected to maintain rapid store opening while developing cabinet categories.
Profit forecasting and valuation
The company's dividend ratio for 23 years was as high as 75%, and the dividend ratio of 952 million yuan corresponding to the current stock price reached 5.9%. It also has the advantages of steady operation, high dividends, and undervaluation, and continues to be recommended. We expect that in 2024-2026, the company will achieve revenue of 130.76/145.02/15.984 billion yuan, a year-on-year increase of 12.09%/10.91%/10.22%, net profit of 15.02/16.77/18.57 billion yuan, an increase of 19.10%/11.63%/10.77%. The current market value corresponds to the 24-26 PE of 10.76/9.64/8.71X, maintaining a “buy” rating.
Risk warning
Real estate market recovery falls short of expectations, industry competition intensifies, channel construction falls short of expectations, etc.