3Q23 performance is slightly lower than we expected.
The company announced 3Q23 results: 1-3Q23 operating income of 4.431 billion yuan, year-on-year + 4.03%; net profit of 360 million yuan, + 28.16%; deduction of non-return net profit of 346 million yuan, + 31.25% year-on-year. Corresponding to 3Q23 income 1.55 billion yuan, year-on-year + 6.56%; return net profit 100 million yuan, + 151.55%; deducting non-return net profit 100 million yuan, year-on-year + 184.72%. Due to the impairment of accounts receivable, the company's performance was slightly lower than we expected.
Revenue performance is better than that of the industry: 1) according to AVC omni-channel data, the overall retail sales of the 1Q/2Q/3Q23 chef electricity industry are-4% less than the same period last year, and the kitchen electricity demand is still flat in the third quarter. 2) the company performed better than the industry. According to AVC sampling data, online / offline retail sales of 3Q23 Huadi chefs were + 5% / + 41% year-on-year, of which online / offline retail sales of new categories such as 3Q23 embedded steaming ovens were + 32% and 86% compared with the same period last year. 3) from a channel-by-channel perspective, the company continues to improve channel operation efficiency and pays attention to terminal retail assessment. We estimate that the growth trend of retail channels (online + offline) is consistent with that of 1H23, achieving double-digit growth, while overseas and engineering channels are relatively weak.
Financial analysis: 1) 3Q23 company gross profit margin 42.6%, year-on-year + 2.5ppt, month-on-month unchanged, year-on-year changes are more from part of the channel cost subjects were adjusted at the beginning of the year, resulting in caliber changes. 2) the sales / management / R & D / financial expense rate of 3Q23 Company is-4.0 / 1.6/+0.3ppt respectively compared with the same period last year, and the overall level of expense rate is well controlled. 3) 3Q23 Company's parent net interest rate is 6.4%, year-on-year + 3.7ppt, month-on-month ratio-3.7pptscape 3Q23 provides for 27.97 million yuan in bad debt provision for accounts receivable. If this effect is restored, 3Q23 Company's parent net interest rate is 8.2%. 4) the net inflow of operating cash of 1-3Q23 company was 357 million yuan, which was + 450 million yuan compared with the same period last year, mainly from strengthening the management of inventory and accounts receivable, and the payback was better.
Trend of development
Channel reform to improve efficiency, new product layout expansion: 1) the company's offline channel has experienced in-depth adjustment. Since last year, the company has actively promoted channel flattening and diversification to make up for its own channel deficiency. 2) the company continues to expand its product matrix and launch new categories such as integrated cookers, dishwashers, steaming and baking machines, which we expect to bring an increase in revenue for the company. 3) recently, the controller of the company has proposed to buy back the shares with 100-200 million yuan, which may be used in the equity incentive plan / employee stock ownership plan, demonstrating the company's confidence in the future development prospects.
Profit forecast and valuation
Due to the impairment of the company's receivables, we have reduced our net profit by 5% to 513 million yuan in 2023, leaving the profit forecast for 2024 basically unchanged. The current share price corresponds to a price-to-earnings ratio of 9.6 times earnings for 2023 Universe. To maintain the outperforming industry rating, due to the decline in earnings forecasts and market concerns about the real estate post-cycle, we lowered our target price by 18% to 7.80 yuan, corresponding to a price-to-earnings ratio of 12.9 times earnings in 2023 / 2024, which is 34.3% higher than the current stock price.
Risk
The risk of the decline of real estate sales is higher than expected; market competition aggravates the risk.