Description of the event
The company disclosed the three-quarter report: The company achieved operating income of 4.431 billion yuan in the first three quarters of 2023, an increase of 4.03% over the previous year, net profit of 360 million yuan, an increase of 28.16% over the previous year, and realized net profit of 346 million yuan, a year-on-year increase of 31.25%.
The company achieved operating income of 1,551 billion yuan in the third quarter, an increase of 6.56% over the previous year, net profit of 98.655 million yuan, an increase of 151.55% over the previous year, and realized non-net profit of 100 million yuan, an increase of 184.72% over the previous year.
Incident comments
Quarterly revenue growth was excellent, and the gross sales gap increased sharply to promote flexible profit growth. The company achieved a 4.03% year-on-year increase in revenue in the first three quarters. Among them, Q1/Q2/Q3 increased 6.24%, 0.36%, and 6.56% year-on-year respectively. Growth in the third quarter increased month-on-month, reflecting strong alpha, or the main benefits of: 1) the overall decline in export sales was narrowed due to strong demand resilience; 2) the company's high-end upgraded product strategy and expansion of new channels achieved positive results, resulting in better domestic online and offline growth performance. On this basis, the company's gross margin for the third quarter increased by 2.55 percentage points year on year, mainly due to raw material cost optimization and better sales of high-end new products. At the same time, the company's sales expense ratio for the third quarter fell sharply by 4.02 percentage points year on year, or mainly due to the company's active endogenous reform and optimization to achieve cost reduction and efficiency. The management expense ratio increased 0.38 percentage points year on year, R&D expenses fell 1.63 percentage points year on year, and the financial expenses ratio increased 0.33 percentage points year on year. Overall, the company's operating profit (gross profit - sales expenses - management expenses) - R&D expenses - financial expenses - operating tax and surcharges) was 130 million yuan, a sharp increase of 844.31% year on year. The corresponding operating profit margin increased by 7.45 percentage points year on year. At the same time, considering that asset impairment was increased by 14.90.8 million yuan and credit impairment by 41.106 million yuan, combined with a year-on-year decline in the comprehensive income tax rate, the company's non-net profit withheld increased significantly by 184.72% year on year.
On this basis, the company's net operating cash flow improved dramatically. The first three quarters increased by 746 million yuan over the same period last year.
The company continues to expand its product line, strengthen brand marketing, improve sales conversion rates, and improve the channel system to effectively expand the market. The company maintains investment in R&D innovation, actively promotes product technology updates, focuses on market trends, accurately explores user pain points, and launched new products such as the Vantage Integrated Cooking Center, Vantage Juyan Stove, Integrated Stove PY55, and Integrated Dishwasher TW50 to gradually increase the proportion of high-end products; the company actively innovates and strengthens marketing methods, and makes full use of emerging marketing channels such as Douyin, Kuaishou, Xiaohongshu, etc., to promote and accurately target brand customers, increase traffic conversion rates, and expand online sales growth space. At the same time, we will continue to promote the layout and construction of new retail channels, continuously increase the store occupancy rate of new retail platforms such as JD stores, Suning Retail Cloud, and Five Star Wanzhentong, expand the market share of third- and fourth-tier cities, and target the marketing characteristics of new retail channels, accelerate the iterative process of product upgrades, enrich channel product categories, and promote continuous optimization of the channel product structure; and strictly control engineering business risks, build and improve the business risk management standard system, strictly abide by the evaluation and credit system, focus on the speed of return of receivables, and improve inventory efficiency.
Investment suggestions: The company has three independent brands: Huadi, Baide, and Vantage Home Furnishing, forming a multi-level and cross-field brand matrix, comprehensively and effectively covering product fields such as kitchen and bathroom categories, smart homes, and whole-house customization, covering a wide range of cities, and accurately meeting the brand needs of different customers. On this basis, the company actively promotes new product innovation and category expansion, and carries out targeted channel expansion, and is expected to continue to grow in scale. The company's net profit from 2023-2025 is expected to be 4.95, 5.67, and 637 million yuan, corresponding to PE of 10.28, 8.96 and 7.98 times, maintaining a “buy” rating.
Risk warning
1. Risk of business fluctuations due to macroeconomic and real estate market conditions; 2. Risk of changes in market share and profit due to increased market competition.