Key points of investment:
Incident: The company released an annual report and quarterly report. In 23, it achieved operating income of 3,538 billion yuan, a decrease of 12.8%; net profit to mother of 3.0 billion yuan, a decrease of 11.1%, a net interest rate of 8.4%, an increase of 0.2 pct; net profit of non-return to mother was 210 million yuan, a decrease of 13.8%, after deducting a net interest rate of 5.9% and a decrease of 0.1 pct.
Looking at a single quarter, 23Q1-24Q1 achieved operating income of 7.0/8.4/9.6/10.4/860 million yuan, a year-on-year change of -30.9%/-30.2%/-1.4%/+19.7%/+23.0%; net profit to mother of 0.5/0.9/0.7/0.9/0.4 billion yuan, a year-on-year change of +9.5%/+1.2%/-53.4%/+72.4%/-17.5% year-on-year. In 24Q1, net profit not attributable to mother was 40 million yuan, an increase of 21.6% over the same period.
The consolidated gross margin for '23 was 22.9%, a year-on-year change of +3.6pct. The cost rate for the period was 15.7%, a year-on-year change of +4.1pct. Among them, the sales/management/ R&D/ finance ratio was 7.4%/5.9%/3.5%/-1.1%, respectively, with a year-on-year change of +3.8/+1.6/-0.5/-0.8pct. The 24Q1 consolidated gross margin was 22.1%, a year-on-year change of -0.3 pct. The cost rate for the period was 16.9%, a year-on-year change of 0.0pct. Among them, sales/management/R&D/finance expenses were 7.3%/5.9%/-0.3%, respectively, with a year-on-year change of +0.9/-0.3/-0.1/-0.5pct.
By product, office chairs/sofases/massage chairs and relaxation chairs achieved revenue of 25.6/5.4/2.4/0.3 billion yuan respectively, accounting for 72%/15%/7%/1%, a year-on-year change of -7.86%/-34.36%/-32.23%/-17.97%. The gross margin of office chair/sofa/massage chair body/leisure chair was 25.29%/15.53%/14.86%/30.21%, respectively, with a year-on-year change of +4.05/1.45/ -0.88/+4.04pct.
By region, domestic/ overseas revenue in '23 was 88/2.64 billion yuan respectively, a year-on-year change of +7.91%/-17.88%, accounting for 25.2%/74.8%. Domestic and overseas gross margins were 22.95%/22.79% respectively, up 2.59/3.79pct year-on-year. By sales model, online sales/offline sales revenue in '23 was 4.4/3.08 billion yuan, a year-on-year change of +55.6%/-17.8%; gross margin was 39.97%/20.37%, respectively, an increase of 5.83/2.22pct.
By brand, the revenue of private brands and non-owned brands in '23 was 71/2.81 billion yuan respectively, a year-on-year change of +66.59%/-22.00%, accounting for 20.2%/79.8%. The gross margin of private brands and non-owned brands was 35.94%/19.51%, respectively, an increase of 5.59/1.55pct over the previous year.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 33/40 million yuan respectively, an increase of 11%/20% year-on-year. The current stock price corresponds to PE 11 and 9 times, respectively. Referring to comparable companies, the PE valuation is 14 to 16 times in 24 years, corresponding to a reasonable value range of 13.90 to 15.89 yuan, giving it a “superior to the market” rating.
Risk warning: International macroeconomic downturn, international trade frictions, raw material price fluctuations, RMB exchange rate fluctuations and export tax rebate policy changes, concentration of major customers, and product quality responsibility.