Key points of investment:
The company issued the 24Q1 results announcement: 24Q1's revenue was 3.621 billion yuan, up 1.4% year on year, net profit to mother was 218 million yuan, up 43.0% year on year, after deducting non-net profit of 143 million yuan, up 10.1% year on year. 24Q1 The increase in non-recurring profit and loss is mainly due to the increase in profit and loss from changes in fair value, and profit and loss from disposal of financial assets and financial liabilities.
Looking at it by channel: The household strategy is progressing steadily, and retail growth is expected to recover; integrated channels are still an important growth engine; large-scale channels strictly control risks and are progressing steadily.
1) Retail channel: In 24Q1, the company's retail business (direct management+distribution channel, including assembly) revenue was 2.769 billion yuan, down 2.7% year on year, of which direct store revenue was 149 million yuan, up 67.0% year on year. The direct sales division was a bridgehead for large households, comprehensively implemented the company's “tadpole style” and “butterfly transformation”, and continued to evolve the company's retail household theory into reality in terms of model exploration, traffic acquisition, and team iterative reshaping. By the end of 2023, there were more than 800 cities that have applied to open Oupai retail stores, and more than 600 cities where major retail stores are already operating normally; the complete distribution channel is being promoted by Opal and Platinum brands, and it is expected that the increase will continue to increase. 2) Bulk channel: 24Q1 bulk channel revenue was 695 million, an increase of 18.8% over the previous year. Facing deep adjustments in the real estate industry, the company strictly controlled the risks of traditional commercial refinement projects while making every effort to develop new forms of low-risk large-scale business, and made steady progress.
By category: Wooden doors and bathrooms continue to grow, driven by packages; with terminal adjustments and multi-channel efforts, cabinet growth is expected to be repaired
1) Wardrobe and accessories: 24Q1 wardrobe and accessories revenue was 1.906 billion yuan, down 3.55% year on year; 2) Cabinet: 24Q1 cabinet revenue was 1,068 million yuan, down 1.6% year on year; 3) Wooden doors: 24Q1 wooden door revenue was 217 million yuan, up 5.0% year on year; 4) Bathroom: 24Q1 bathroom revenue was 203 million yuan, up 10.2% year on year. Driven by door, wall cabinets, and kitchen and bathroom packages, the company's wooden doors and bathroom facilities have continued to grow; with terminal adjustments and multi-channel efforts, the growth of cabinets and wardrobes is expected to recover.
Lean management improves quality and efficiency, and the trend of improving gross margin is obvious. 24Q1's gross margin was 30.0%, up 3.3 pct year on year; net margin was 6.0%, up 1.9 pct year on year. Cost reduction and efficiency improvements and declining raw material prices led to a year-on-year increase in the company's gross margin. The company's expense ratio for the 24Q1 period was 24.5%, up 2.8 pcts year on year. Among them, the sales/management/R&D/finance expenses rates were 11.6%, 8.2%, 6.2%, and -1.5%, respectively, with year-on-year changes of +1.9, -0.5, +1.0, and +0.5 pct. The year-on-year increase in the company's sales expenses ratio was mainly due to an increase in marketing investment and one-time subsidies for personnel optimization.
In 2023, the company took the initiative to break the game and seek change, comprehensively shifting from category management to a city-centered business model, fully accelerating the promotion of large household strategies, optimizing dealers and stores, and mobilizing terminals to transform into all categories. Under the multi-channel drainage model, growth recovery in 2024 can be expected. The company's forward-looking strategy+excellent tactical execution is actively breaking the game and seeking change. Competitiveness is still there, and growth is expected to recover. The company proposed in its annual report that in 2024, the company will strive to achieve a 5% to 10% year-on-year increase in operating income and a 5% year-on-year increase in net profit, indicating its confidence in growth.
Real estate relaxation policies continue to be introduced, which is expected to boost the valuation of the home furnishing industry; the company actively adapts to market changes, breaks through traditional management inertia in the industry, makes organizational structure adjustments, promotes category integration, fully enters the home with multiple models of home furnishing, forward-looking strategy+excellent tactical execution, actively breaking the game and seeking change. Competitiveness is still there, and growth is expected to recover. Maintain the company's 2024-2026 net profit of 32.42, 35.35, and 38.26 billion yuan, up 6.8%, 9.1%, and 8.2% year-on-year respectively. The current stock price corresponds to 2024-2026 PE 10 times, respectively. We are optimistic about the company's long-term growth. The current valuation safety margin is sufficient, the medium- to long-term allocation value is prominent, the dividend ratio provides a margin of safety, and maintains a “buy” rating.
Risk warning: Demand for terminals is weak, and the new model is falling short of expectations.