Event: Hua Di shares announced the third quarterly report of 2023. In the first three quarters of 2023, the company realized income of 4.43 billion yuan, YoY+4.0%; realized net profit of 360 million yuan, and YoY+28.2%; realized non-return net profit of 350 million yuan, YoY+31.3%. In a single quarter, the income of 2023Q3 is 1.55 billion yuan, the net profit of YoY+6.6%; is 100 million yuan, and the net profit of YoY+151.6%; is 100 million yuan, YoY+184.7%. We believe that the company's business adjustment is gradually effective and look forward to improving its performance in the future.
The company's Q3 e-commerce channel performs well: according to Oviyun data, the online and offline retail volume of Huadi range hood / gas stove Q3 is YoY+7%/+9% respectively. We judge that the sales of 2023Q3 Huadi's various channels are as follows: 1) Huadi Q3 e-commerce channel achieved double-digit growth, the fastest growth among all channels; 2) 2023Q3 Huadi offline retail sales also achieved double-digit growth compared with the same period last year. 3) the company controls the operating risk, and the channel revenue of Q3 project declines. 4) Q3 overseas revenue decreased compared with the same period last year. We believe that at the corporate level, Huadi actively implements channel changes, reduce costs and increase efficiency, and the effect of the reform is expected to appear.
Improvement in Q3 profitability: according to the company announcement, the net return rate of Huadi 2023Q3 is 6.4%, which is + 3.6pct compared with the same period last year, and the profitability is improved, mainly because the cost price is lower than last year, the company adjusts the product structure, and the difference between Q3 gross profit margin and sales fee rate is + 6.6pct.
Q3 operating cash flow significantly improved: according to the company announcement, Huadi 2023Q3 single-quarter net operating cash flow increased by 450 million yuan compared with the same period last year. According to our analysis, the main reasons are: 1) the company's sales of money back through various channels is better, and the cash received by Q3 in selling goods and providing services has increased by 400 million yuan compared with the same period last year; 2) because the price of raw materials is still lower than that in the same period last year, the cash paid by Q3 for purchasing goods and receiving services decreased by 110 million yuan compared with the same period last year. We believe that in the fluctuating stage of consumption, the company has abundant cash flow and high management quality.
Investment advice: with Huadi's new products on the market one after another, profitability is expected to be further improved. The company will continue to strengthen channel expansion and brand promotion in the future, and we expect the company's operation to improve.
We estimate that the company's EPS from 2023 to 2024 is 0.59 yuan, maintaining the buy-An investment rating, and the 6-month target price is 7.08 yuan, corresponding to 12 times the dynamic price-to-earnings ratio in 2023.
Risk hint: the real estate boom is declining and the competition pattern in the industry is deteriorating.