Event: The company released its 2023 annual report and the first quarter report of 2024
The company released the 2023 annual report and the first quarter report of 2024. In 2023/2023Q4/2024Q1, revenue of 35.38/10.38/857 million yuan was achieved respectively, -12.75% /+19.
70%/+22.96%; net profit attributable to mother was 298/0.87/0.43 billion yuan, respectively, -11.14%/+72.39%/-17.47%; net profit without return to mother was 2.09/0.14/43 million yuan, respectively, -13.82%/-72.00%/+21.60%. The decline in full-year performance in 2023 is mainly due to channel inventory removal putting pressure on export companies' orders. However, as inventory pressure from European and American channel vendors decreased in the second half of 2023, China's office chair and sofa exports showed a clear upward trend, and the company's sales revenue also showed a positive trend of quarterly recovery.
Strengthen domestic sales, brands, and online businesses, and continue to optimize the revenue structure by product. In 2023, office chairs/sofases/massage chairs and other businesses achieved operating income of 25.58/5.37/2.37/0.29/ 166 million yuan, -7.86%/-34.36%/-32.23%/-17.97%/+196.12%, respectively, with gross margins of 25.29%/15.53%/14.86%/30.21%/18.64% year-on-year, +4.05/+1.45/- 0.88/+4.04/+3.16pcts. By sales model, online sales and offline sales achieved revenue of 443/3.083 billion yuan respectively in 2023, +55.57%/-17.78% year-on-year, and gross margins of 39.97%/20.37%, respectively, and +5.83/+2.22pcts year-on-year. By region, in 2023, export/domestic sales achieved revenue of 2,635/892 million yuan respectively, -17.88%/+7.91% year-on-year, and gross margins of 22.79%/22.95%, respectively, +3.79/+2.59pcts. In 2023, the company's domestic sales/brand/online business revenue accounted for 25%/20%/13% of overall revenue, respectively, +5/+9/+6pcts, respectively, and the business structure changed positively.
Internal and external factors jointly promoted the increase in gross margin, boosting the brand & online sales expense ratio, and the gross margin of the 2023/2023Q4/2024Q1 company was 22.88%/22.41%/22.11%, respectively, +3.54/+1.08/ -0.33pcts; net profit margin to mother was 8.42%/8.35% /4, respectively.
98%, +0.15/+2.55/-2.44pcts year over year. Many factors, such as an increase in the share of the independent brand business, optimization of product structure, continuous cost reduction and efficiency, a decline in raw material prices, a depreciation of the RMB, and a decline in shipping costs, contributed to the increase in the company's gross margin. 2023/2023Q4/2024Q1 sales expense ratios were 7.43%/10.50%/7.30%, respectively, +3.81/+7.03/+0.92pcts; management expense ratios were 5.88%/7.72%/5.94%, +1.54/+4.06/-0.26pcts; R&D expense rates were 3.47%/2.67%/3.91%, year-on-year, -0.49/ -3.19/-0.09pcts, respectively; financial expense ratios were -1.12% /- 0.12%/-0.27%, -0.77/ -0.54/-0.53 pcts year over year. Strengthening the brand business and online e-commerce business has led to an increase in the company's sales expenses ratio.
Investment advice
The company is accelerating the strategic transformation from a “mainly export OEM model” to a “equal emphasis on domestic and foreign sales, equal emphasis on independent brands and ODM models”. As the new business gradually climbs, the old business is also expected to continue to improve, and subsequent performance is expected to continue to grow. We expect the company's revenue in 2024-2026 to be $44.13/53.11/6.254 billion yuan, respectively, up 24.7%/20.3%/17.8% year on year; net profit to mother will be 333/4.09/498 million yuan, respectively, up 11.9%/22.9%/21.6% year on year. As of April 30, 2024, the total share capital and EPS corresponding to the closing market value were 1.00/1.23/1.50 yuan, respectively, and the corresponding PE was 11.75/9.56/7.86 times, respectively. First coverage, giving a “buy” rating.
Risk warning
International macroeconomic downturn risk, international trade friction risk, raw material price fluctuation risk, RMB exchange rate fluctuation and export tax rebate rate policy change risk, major customer concentration risk.