Description of the event
Q1 The company achieved revenue/net profit/net profit after deduction of non-net profit of 21.11/1.65/ 156 million yuan, an increase of 17%/59%/74% over the same period.
Incident comments
Q1 Revenue growth is excellent. Q1 revenue also increased 17%, close to the upper limit of the forecast range (10%-20%). The main reasons were: 1) the overall strategy continued to be promoted; 2) the previous year's base was low; 3) the year-on-year delay of the Spring Festival brought in sufficient production orders. By brand:
1) Sophia brand: It is estimated that Q1 is growing well under the overall strategy (2023Q4 +15%). Among them, kitchen cabinet and wooden door support increased, continuing to boost customer order value (factory-side customer orders also increased 6% in 2023).
2) Milana brand: It is estimated that Q1 will continue its high growth trend (2023Q4 +22%), with a net increase of 176 to 514 stores in 2023 (same increase of 52% in the number of stores at the end of the year). Horizontal category expansion boosted the same 7% increase in factory-side customer orders in 2023. It is estimated that Q1 customer orders will continue to rise.
3) Huahe & Simi: Both have now been adjusted under the overall strategic framework, and will gradually return to normal operation this year.
Furthermore, it is estimated that the Q1 assembly channel is still growing strongly (2023Q4 +38%). Among them, the number of integrated assembly companies increased net by 61 to 221 in 2023, covering a net increase of 92 to 185 in the number of cities and regions. The cultivation and expansion of existing assembly companies and the cooperation and development of new equipment companies continued to contribute to the increase.
Q1 Gross profit margin was stable, and lower cost ratios led to an improvement in profit margins. Q1 gross margin decreased slightly by 0.6 pct, and the cost ratio was better controlled. The sales/management/R&D/finance expenses ratio also decreased by 1.1/0.9/0.2/1.1 pcts. Among them, the sharp drop in financial expenses (reduced by about 20 million yuan to 160,000 yuan) was mainly due to optimized financing methods. The Q1 attribute/deducted non-net interest rate increased by 2.1/2.4 pcts year-on-year. Among them, the growth rate of deducted non-net profit (+74%) was close to the upper limit of the forecast range (50%-80%).
In Q1, cash received from sales of goods and services decreased by 21%, mainly due to adjustments in the dealer assessment caliber this year, and positive growth can be achieved under the same caliber.
Under the overall strategy, Sophia Retail is the core incremental source. Milana & Integrated Packaging is growing rapidly, expanding ancillary products and increasing customer order flexibility. 1) Sophia retail is expected to grow steadily, with kitchen cabinets, wooden doors, household goods, etc. all contributing; 2) Integrated packaging is expected to continue to increase; 2) The deepening cooperation with equipment companies and the gradual introduction of kitchen cabinet categories is the driving force for growth; 3) Milana's superior growth is expected to continue, maintaining rapid store expansion and optimized operations with the prospect that there is still plenty of room for investment and opening; 4) Simi & Huahe will start again after adjustments, and the overall strategy will be strengthened, and the number of stores will expand at the same time; 5) The engineering business is expected to be steady, and exports are expected to expand steadily. High increase. Cost reduction measures continue this year, and gross margin is expected to rise steadily.
I am optimistic that the company will advance the big household strategy, and the high dividends are expected to continue. The company has an excellent channel system and manufacturing capabilities. At this stage, there is still plenty of room to drive customer order growth and category expansion with a whole-house model. The complete channel is in a stage of rapid development, and Milana and others have formed a good momentum to supplement the brand matrix and grow. The 2023 dividend ratio is 75%, which corresponds to the current dividend rate of 5.8%, and the dividend rate is expected to remain high in the future. In the early stages, the company announced employee stock ownership plans, which will help stimulate team motivation. The company is expected to achieve net profit of 1,48/1.68 billion yuan in 2024-2025, corresponding to PE 11/10x, maintaining a “buy” rating.
Risk warning
1. Real estate sales and completion fell short of expectations. 2. The results of the company's channel operation and transformation are lower than expected.