Matters:

The company announced the 24-26 shareholder dividend return plan. The company promises that, in principle, the total cash dividend for 24-26 will not be less than RMB 1.5 billion (including principal amount; this dividend amount is the amount including tax). Based on the closing price on September 19, the corresponding dividend rate is not less than 5.5%.

Commentary:

Active dividends are given back to shareholders, and management has sufficient confidence in development. The company has sufficient cash on hand, holding 11.5 billion yuan in monetary cash as of 24Q2. In terms of shareholder return, the company has continued to increase its dividend ratio in recent years. The company's total cash dividend in 2023 was 1.67 billion yuan, accounting for about 55% of net profit to mother (40% in 2022), and the dividend rate increased significantly. Meanwhile, in 2023, the company's cumulative repurchase amount was 0.31 billion yuan, and repurchases+dividends accounted for about 65% of net profit attributable to mother. The company announced the shareholder dividend return plan for the next three years, promising the bottom line of dividends, demonstrating long-term business confidence, and continuing to be optimistic about the company's future high-quality development.

Implement measures to reduce the burden on dealers, and continue to deepen the household strategy. Facing the current consumer environment, the company is taking active actions to boost terminal confidence. On the product side, the company comprehensively optimizes the product and price matrix, promotes the special price range for powder spraying, complements the types of packages that are just needed, and helps terminals seize the market. On the channel side, the company optimizes assessment policies, reduces dealers' operating costs, abolishes overall requirements for the number of distribution stores, encourages dealers to consolidate and close stores that lose money and have no drainage capacity, and drastically reduce various assessment indicators. At the same time, the company continued to develop the warehouse distribution system. In the first half of the year, the company signed agreements with trunk line carriers in more than 300 cities. The main line covered goods accounted for more than 90% of the company's total cargo volume. The “big delivery” system reform leading the industry has achieved remarkable results. Investment advice: The company is a leader in the custom home furnishing industry. It is still active against the backdrop of market pressure, steadily advancing channel transformation and empowering household strategies, and continues to focus internally on reducing costs and increasing efficiency to seek benefits. We are optimistic about the company's future room for market share growth. Maintaining the previous profit forecast, we expect the company's net profit to be 2.787/3.012/3.244 billion yuan for 24-26, respectively, and the PE corresponding to the current stock price is 10/9/8X, respectively. Referring to comparable company valuations, we gave the company 12 times PE in 2024, corresponding to a target price of 54.9 yuan/share, maintaining a “strong” rating.

Risk warning: Macroeconomics affects demand; risk of fluctuations in raw material prices; channel expansion falls short of expectations, etc.