Incidents:
Chuangke Industrial announced on March 6, 2024: In 2023, the company achieved a turnover of US$13.731 billion, +3.6% year on year, net profit of US$976 million, -9.4% year on year, gross profit margin of 39.5%, +0.14 pct compared to the same period last year, net profit margin 7.1%, -1 pct compared to the same period last year, diluted EPS of 53.17 cents. The company plans to pay a final dividend of 98 HK cents per share.
Investment highlights:
Results improved significantly in the second half of 2023. MILWAUKEE's business performance was outstanding: in 2023, the company achieved turnover of US$13.731 billion, +3.6% year over year, net profit to mother of US$976 million, -9.4% year-on-year, gross profit margin 39.5%, +0.14pct compared to the same period last year, and a net profit margin of 7.1%, compared to the same period last year. In terms of revenue breakdown, 1) Business Segment: Electric Tools +3.8% YoY; MILWAUKEE Sales +10.3% YoY; Excellent Performance, Floor Care and Cleaning +1.3% YoY; 2) By Region: North America +2.74% YoY, Europe +8.59% YoY, and Other Regions +2.84% YoY. The company's performance improved significantly in the second half of 2023. 2023H2 revenue was +10.2% year over year, and net profit to mother was +0.2% year over year. Along with the inventory digestion of downstream end customers, we are optimistic that the company will basically face upward in the future, and profitability is expected to continue to recover.
The overall operation was steady, and the number of inventory turnover days dropped significantly. In 2023, the company's total operating expenses accounted for 31.3%, +0.9pct compared to the same period last year, accounting for 4% of product design and development expenses, +0.3 pct compared to the same period last year, net interest expenses accounted for 0.6%, and +0.3 pct compared to the same period last year. Cash and cash equivalents were US$953 million, and capital expenses were US$502 million, or -13.6% YoY.
By the end of 2023, the company's inventory was US$4,098 billion, -19.4%, and the number of inventory turnover days -31 to 109 days, a significant improvement. Raw material inventory turnover - 2 days to 22 days, manufactured goods inventory turnover - 29 days to 84 days, accounts receivable turnover days +4 days to 45 days, accounts payable turnover - 14 days to 90 days, overall operation is steady.
Profit forecast and investment rating: Based on the impact of the external economic environment, we adjusted the company's profit forecast. The company's revenue for 2024-2026 is 148.5, 163.2 and 17.94 billion US dollars, up 8.2%, 9.9%, and 10.0% year on year; net profit to mother is 11.6, 13.6, and 1.6 billion yuan, up 18.5%, 17.2% year on year. Corresponding to the closing price on March 8, PE was 19, 16, and 14X. We are optimistic that the company's brands will further gain more consumer recognition under category expansion and technology upgrades, achieve impressive revenue and performance growth, and maintain a “buy” rating.
Risk warning: Technology upgrade falls short of expected risk; product market response falls short of expected risk; risk of developing new categories falling short of expected risk; risk of insufficient recovery in downward economic demand; risk of increased market competition and deterioration of the competitive landscape; other risks, etc.