Summary content
The company is a leading global smart home appliance company, and profits have maintained rapid growth over a long period of time. Ingenuity Home is mainly engaged in R&D, design, production and sales of smart electric sofas, smart electric beds and their core accessories. It has been deeply involved in the US and international markets for many years, accumulated high-quality customer resources, and gradually developed its own brand.
The company's profit level continued to grow. Net profit to mother increased from 138 million yuan in 2018 to 334 million yuan in 2022, with a CAGR of 24.83% during the period; as of Q3 2023, it achieved net profit of 323 million yuan, an increase of 25.56% over the previous year.
Functional sofas in the US are developing steadily, and the company's smart sofa business is growing rapidly with high quality. Core inflation in the US has slowed, and the overall inventory to sales ratio of the home furnishing industry is low. Subsequent improvements in demand are expected to usher in active inventory replenishment. The United States is the world's leading consumer market for home furnishing, and is currently the company's most important market. In 2022, the scale of the US functional sofa industry grew steadily to US$20.5 billion, with a market penetration rate of 49.70%; Ingenious Home Smart Electric Sofa was positioned as a high-end product, leading in development quality. From 2018 to 2022, the smart sofa revenue CAGR was 20.92%, exceeding the industry's growth rate by more than 10 pct, which is expected to increase market share in the future.
With new products+new customers+new brand+new model, the company is expected to continue leading the way under incremental advantages. New products:
Strong R&D capabilities support the continuous introduction of new products, and the launch of the MotoLiving series of products in 2023 defines a new category in the industry. New customers: The company continues to develop new customers, continues to enter the “Top 100 Furniture Retailers in the US”, and is expected to expand in retail channels in the future. New brand: Continue to build overseas independent brands through a new brand design and advertising slogan; New model: open a store-to-store model in terms of channels, increase brand exposure, and strengthen OBM business. Under the incremental advantage, the company has the driving force for high-quality growth in performance and continuous leadership.
Investment advice: We expect the company to achieve net profit of 4.13/4.81/589 million yuan from 2023 to 2025, corresponding EPS of 3.22/3.76/4.60 yuan/share; give the company a 2024 17xPE valuation, corresponding to a target price of 63.92 yuan/share. First coverage, giving a “buy” rating.
Risk warning: Demand in the US consumer market falls short of expectations; raw material prices fluctuate greatly; risk of exchange rate fluctuations; risk of falling short of expectations for independent brand expansion; geopolitical risk.