Event: Qumei Home released its 2023 three-quarter report. 23Q1-3 achieved operating income of 2,932 billion yuan, a year-on-year decrease of 21.83%; net profit of the mother - 206 million yuan, a year-on-year decrease of 228.43%; net profit after deduction of net profit of 190 million yuan, a year-on-year decrease of 253.28%. Among them, the 23Q3 company achieved operating income of 984 million yuan, a year-on-year decrease of 18.88%; net profit of net income of 49 million yuan, a year-on-year decrease of 242.00%; net profit after deducting non-return to the mother - 64 million yuan, a year-on-year decrease of 274.79%.
Domestic and foreign demand is weak, and demand is expected to recover
In terms of foreign business, the overall demand for durable consumer goods is under pressure due to 2023Q1-3 overseas inflationary pressure, and downstream household inventory continues to be removed. We expect overseas dewarehousing to continue to advance, demand for inventory replenishment is expected to increase, and overseas orders from Q4 companies are expected to recover. The company continues to increase the channel penetration rate of non-comfortable chair products such as electric chairs, functional sofas, and dining chairs, and has achieved good results. At the same time, the company actively penetrated the North American market and continued to sink through buyer channels in the North American market. As demand in the European and North American markets warms up, overseas business orders have gradually resumed positive year-on-year growth. The decline in shipping charges and raw material prices is expected to drive the company's profitability to continue to recover.
In terms of domestic business, the company continues to deepen its brand renewal work, position the “multi-purpose space” brand, build online content assets, and build a Qumei Lab Dundun sofa content matrix on content platforms such as Xiaohongshu and Douyin to increase brand exposure and topics. The company takes consumer demand as the core, continues to promote product innovation, and provides product support for brand upgrades. “Dundun Sofa” and “2023 New B8” products have been well received in retail and dealer channels. The company grasped the time window of offline recovery, combined with new products, upgraded its store image, and recruited new dealers. The quantity and quality of offline channels were improved, laying the foundation for subsequent business growth.
Profitability is under pressure in the short term, and cost control has achieved remarkable results
In terms of profitability, the gross margin of 2023Q1-3 company was 31.44%, down 2.81 pct year on year; 23Q3 single quarter gross margin was 32.87%, down 1.43 pct year on year.
In terms of period expenses, the 23Q1-3 company's period expense rate was 37.80%, up 8.42pct year on year. Sales/management/R&D/finance expense ratio was 20.37%/8.82%/2.11%/6.48% respectively, up 3.57/1.15/0.13/3.57pct respectively. Among them, the year-on-year increase in financial expenses was mainly affected by the decrease in the company's exchange earnings.
Investment advice: Qumei Home Furnishing's domestic and overseas business is working collaboratively, and performance is expected to pick up at the bottom.
We expect Qumei Home Furnishing's revenue for 2023-2025 to be 43.18, 51.40, and 6.10 billion yuan, up -11.02%, 19.03%, and 16.94%; net profit is -1.12, 2.16, and 313 million yuan, up -403.18%, 293.03%, and 44.80%. The corresponding PE is -27.5x, 14.2x, and 9.8x, giving a target price of 6.80 yuan, maintaining a buy-A investment rating.
Risk warning: the risk of increased competition in the industry; the risk of rising raw material prices; the risk of continued tension in shipping.