Incident: The company released its 2023 annual report. The full year of 2023 achieved revenue of 3.10 billion yuan, a year-on-year increase of 16.5%; net profit to mother was 210 million yuan, an increase of 625.2% over the previous year. The performance was in line with expectations.
Performance has increased significantly, and profit margins have increased significantly. (1) In terms of gross margin: Benefiting from factors such as product structure optimization, the increase in the exchange rate of the US dollar to RMB, and the decline in shipping costs, the company's gross margin increased by 5.1 pct to 36.7% year-on-year in 2023. By product, the gross margins of smart electric beds/mattresses/accessories and others in 2023 were 35.7%/46.6%/43.3%, respectively, +5.1pct/+8.6pct/+16.7pct. By region, overseas/ domestic gross margins were 35.8%/54.5%, respectively, +5.5pct/+11.5pct. (2) In terms of cost ratio: The company's total expense rate in 2023 was 26.5%, up 1.2 pct year on year; sales rate/management rate/R&D rate/finance rate were 12.9%/9.8%/4.8%/-1.0%, respectively, -1.9%/0.8%/-1.2%/3.5% year on year; the increase in financial rates was mainly due to a decrease in exchange gains and losses. (3) In terms of non-operating profit and loss: The company's net income from changes in fair value in 2023 increased by 130 million yuan to 0.05 billion yuan year-on-year from -120 million last year.
Overseas core customers cooperate steadily and actively expand incremental new customers. The company's main business accounted for 92.5% of overseas revenue in 2023. At the beginning of 2024, the company extended the electric bed product manufacturing and supply agreement with Tempur SealyInternational, Inc. (Tempur SealyInternational, Inc.) until March 31, 2027, and renewed the five-year electric bed product manufacturing and supply agreement with Serta Simmons Bedding (LLC). Among them, Tempel Sealy is the company's largest customer, and the company's share of sales revenue in 2021-2023 was 50.9%/47.7%/47.2%, respectively. Stable cooperation with major customers lays the foundation for the company to maintain its market share advantage in the North American market. At the same time, the company is actively expanding new overseas customers, and customer orders in the European market picked up markedly in 2023. In 2024, as the European and American markets enter the inventory replenishment cycle and demand recovers, the company's overseas orders are expected to grow steadily.
Deeply involved in the domestic market, the “Schuford” brand strength and number of stores have both grown. As the only designated smart electric bed supplier for the Beijing Winter Olympics in 2022, the company took advantage of the heat to put forward the concept of “new sleep” and the advertising slogan “once you sleep, sleep comfortably”, reaching deep into the consumer community. In 2023, the company opened a total of 109 “Schuford” stores in various provinces and cities across the country to raise consumers' awareness of the “Schuford” brand products. Domestic revenue from the company's main business increased 55.1% year-on-year to 220 million yuan in 2023.
The dividend rate was greatly increased to 172% to give back to shareholders. The company attaches importance to shareholder returns. It plans to pay a dividend of 1.0 yuan per share in 2023, with a total proposed dividend amount of 350 million yuan, and a dividend rate of 171.6%.
Profit forecast and investment rating: As a smart electric bed faucet, the company has a significant first-mover advantage, and domestic and foreign sales go hand in hand. According to the company's latest annual report, we slightly raised the company's net profit forecast for 2024/2025 to 30/350 million yuan (previous value was 29/340 million yuan), and the estimated net profit for 2026 is 410 million yuan. The corresponding EPS is 0.82/0.98/1.13 yuan, and the corresponding PE is 14.3X/12.1X/10.4X, maintaining a “buy” rating.
Risk warning: The intensity of US interest rate cuts and real estate recovery fell short of expectations; the deterioration of trade relations between China and the US exceeded expectations; the risk of fluctuations in exchange rates and shipping costs exceeded expectations; and the increase in the penetration rate of electric beds fell short of expectations.