Zhejiang Dama's net profit cut in half in 2024

Zhejiang's big seller, which is keen on setting up overseas warehouses, has released its report card.

Net profit halved

On January 13, Lechuang Holdings released its 2024 performance forecast. The company expects a sharp decline in performance, with net profit attributable to shareholders of listed companies of 300 million to 340 million, a year-on-year decrease of 52.66% to 46.35%. Net profit after deducting non-recurring gains and losses is 180 million to 210 million yuan, a year-on-year decrease of 28.56% to 16.65%.

In 2023 , Lechuang's revenue and net profit both saw rapid growth. The company achieved operating income of 3.902 billion yuan, an increase of 21.61%; net profit attributable to shareholders of the listed company was 634 million yuan, an increase of 189.72%; net profit attributable to shareholders of the listed company after deducting non-recurring items was 252 million yuan, a year-on-year increase of 142.38%.

Compared with 2023, Lechuang Holdings' development slowed down in 2024 and its net profit was halved.

In this regard, the company stated that the main reasons for the performance changes include that the company's small warehouse to large warehouse conversion is in the final stage in 2024, and the non-recurring income from the sale of overseas warehouses has dropped significantly; the company explores new models and new businesses, and investment in new product research and development has increased significantly; the operating area of ​​overseas warehouses has increased significantly year-on-year, affected by the new accounting leasing standards The rent is pre-paid, and the installation process of the new warehouse shelves is relatively long, and the storage capacity needs to be gradually released and ramped up; shipping costs are generally high, affecting the profits of cross-border e-commerce business.

On the day after the release of its performance forecast, Lejia Holdings was surveyed by 31 institutions including fund companies and securities companies, further revealing information that its net profit had shrunk significantly.

In 2024, Legg Group's overseas warehouses will open a large number of new warehouses. Due to the strong online consumption in the United States, the penetration rate of e-commerce continues to increase, and the demand for overseas warehouses increases. The entire industry is in a state of substantial expansion. At the end of 2024, the capacity rate of Legg Group's overseas warehouses will be around 70%. In 2025, it will mainly release storage capacity and improve storage capacity utilization through shelf construction, etc., and may expand warehouses slightly depending on the situation.

Lechuang also mentioned that the company's R&D, IT, sales and other personnel will increase significantly in 2024, and R&D investment will increase significantly, but it has not yet made a profit. In 2025, it is still in the early stages of cultivating the distribution business, and customer and factory resources are constantly accumulating.

Regarding the main smart home and overseas warehouse businesses, the focus of Legg Group's 2025 plan is: For the smart home business, it will expand new products and channels around healthy office and smart home scenarios to ensure a certain revenue growth; for the overseas warehouse business, it will improve the profit margin of overseas warehouses by rationally utilizing existing warehouses, increasing the storage capacity utilization rate of overseas warehouses, strengthening refined management.

Growth rate returns to stable

Leggett Holdings was founded in 2002 and is headquartered in Ningbo, Zhejiang. The company was listed on the Shenzhen Stock Exchange's Growth Enterprise Market on December 1, 2017. It is the first A-share listed company in the health and ergonomics industry and the first cross-border e-commerce stock to be listed through an IPO.

Judging from the newly released estimated profit for 2024, Legg Group's performance is not poor, but compared with the rapid growth in 2023, the profit growth rate in 2024 will return to a stable level.

From 2020 to 2022, the operating income of Lechuang Holdings was RMB 1.941 billion, RMB 2.871 billion, and RMB 3.208 billion, respectively, with continued growth; the net profit attributable to the parent company was RMB 217 million, RMB 185 million, and RMB 219 million, respectively, which is about RMB 200 million in net profit each year.

By 2023, Lechuang's revenue will be 3.902 billion yuan, and its net profit attributable to the parent company will soar from 200 million yuan to 634 million yuan. By 2024, the net profit is expected to be 300 million yuan, which is a big reduction compared to the big jump in 2023, but it is still normal in terms of the situation in the past few years.

In the first half of 2024, Lejia Holdings' operating income was 2.427 billion yuan, a year-on-year increase of 44.64%, and the net profit attributable to shareholders of the listed company was 160 million yuan, a decrease of 63.86% from the same period last year. This was mainly due to the sale of overseas warehouses in January 2023, which generated large non-operating income and increased the current asset transfer income by 73.52 million US dollars before deducting transfer income tax.

In the first three quarters of 2024, Lechuang Holdings' operating income was 3.975 billion yuan, a year-on-year increase of 48.03%; net profit was approximately 265 million yuan, a year-on-year decrease of 48.64%.

In its performance briefing, Lechuang Holdings said that in the first three quarters, Lechuang's overseas warehouse business continued to maintain a high growth trend, and new smart home products gradually gained volume. However, in order to achieve sustainable growth, some of the initial investments in strategic layouts had an impact on overall profits; on the other hand, in order to attract and retain talent, the company adjusted its salary and welfare policies, and the growth of various expenses also affected profits.

In general, all of Lechuang's businesses have maintained a steady growth trend, the main product business has shown a clear recovery trend, new products are constantly increasing in volume, and the overseas warehouse business has become Lechuang's second growth curve.

Investing heavily in overseas warehouse business

The main business of Lechuang Holdings is divided into two major sectors: smart home and overseas warehouse. The main products of smart home include smart height-adjustable tables, smart electric beds, smart study tables, smart height-adjustable tables, fitness chairs, etc. In addition to serving its own products, its overseas warehouse business also provides cross-border logistics services such as external leasing and first-leg shipping.

Leckey's core categories, such as smart height-adjustable tables, are industry leaders both at home and abroad. Its overseas flagship "FlexiSpot" brand height-adjustable tables rank first in sales in the height-adjustable table category on e-commerce platforms such as Amazon, Home Depot, Walmart, Rakuten, and Yahoo . Its self-built independent website "flexispot.com" is in the first echelon among global independent vertical e-commerce websites for linear drive application products.

In 2023, Leckey's ergonomic product series achieved revenue of 2.612 billion yuan, accounting for 66.94% of total operating income.

This year, Lejia Holdings' public overseas warehouse business has experienced rapid development, achieving revenue of 951 million yuan, an increase of 94.03% over the previous year. The gross profit margin increased by 9.32% to 12.69%, and the proportion of total operating income increased to 24.38%.

In the first half of 2024, Lejia Holdings' public overseas warehouse business continued to develop rapidly, achieving revenue of 851 million yuan, and its share of operating income increased to 35.07%.

In recent years, Lejia Holdings has gradually shifted its business focus to overseas warehouses.

In 2013, the company established its first overseas warehouse, and launched the third-party overseas warehouse model in 2020. These overseas warehouses are all self-operated, mainly providing services for medium and large-sized cross-border e-commerce sellers. As of the first half of 2024, the company has 17 self-operated overseas warehouses around the world, covering an area of ​​482,100 square meters. It has processed more than 4 million parcels , an increase of more than 120% year-on-year, and has served a total of 778 foreign trade companies, including listed companies and top sellers in the vertical category of medium and large-sized products.

From the capital injection of Lechuang Holdings, we can also see its emphasis on overseas warehouse business. In December 2024, the company announced that it would invest US$97 million (equivalent to RMB 700 million) to build an overseas warehouse in California, USA. The land area of ​​the overseas warehouse is about 312,100 square meters, and the construction area is about 111,500 square meters. It is expected to be completed by April 2026.

Lechuang started to build overseas warehouses in 2013. As its products involved large shipments, it has set up overseas warehouses in many places in the U.S. As shipping costs soared during the pandemic, Lechuang saw the prospects of overseas warehouses. After 2020, the company frantically bought land, warehouses, and even ships.

In 2020, Lucky bought a warehouse in California, USA, with an area of ​​about 33,400 square meters, which was its largest warehouse in the western United States at that time. In 2021 and 2022, Lucky began to buy land directly. In 2021, it bought 5 plots of land in California for the construction of overseas warehouses. In 2022, Lucky said it would buy two plots of land in California. In these two years, Lucky spent US$17.61 million and US$25 million respectively.

Overseas warehouses also brought actual benefits to Lechuang in 2023 and 2024. Previously, Lechuang announced a series of business focuses in 2024, including overseas warehouse business, when it was surveyed by institutions. In the recent survey, it mentioned that the key plan for 2025 still includes overseas warehouse business. Lechuang seems to have found a way to make money through overseas warehouses, and this business will become the key to driving profitability in the next few years.

Zhejiang big seller

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