Key points of investment:
After getting rid of the burden and starting again, the company's profitability improved dramatically in '23. The company previously announced its 2023 annual results forecast. It is expected to achieve net profit attributable to shareholders of listed companies of the full year of 2023, up 179.54%-242.44% year on year, and is expected to achieve net profit of 3.7 to 4.6 billion yuan, an increase of 315.63%-416.73% year on year. The sharp increase on the performance side is mainly due to the company preparing for impairment on various assets, including accounts receivable, inventory, etc., in '22, which affected the lower performance base. The company's net sales margin for the first three quarters of 2023 was 8.17%. We expect that 23Q4 will still have a small amount of bad debt, and the annual net interest rate is expected to return to above 7%. Compared with the net interest rate level of 2.62% in 2022, the overall profitability has improved significantly.
The resilience of newly needed kitchen appliances is prominent, product demand is recovering strongly, and its share continues to rise. According to Aowei Cloud Network (AVC) omni-channel marketing data, in 2023, China's kitchen and bathroom market achieved retail sales of 87.33 million units, an increase of 0.8% over the previous year, and achieved retail sales of 167 billion yuan, an increase of 5.3% over the previous year. Among them, in terms of traditional immediate demand categories, the range hood category achieved retail sales volume of 18.85 million units, +2.7% year over year, achieving retail sales of 31.5 billion yuan, or +6.5% year over year; the gas stove category achieved retail sales volume of 21.09 million units, -1.9% year over year, achieving retail sales of 17.7 billion yuan, or +3.8% year over year, highlighting the overall resilience of traditional smoke stoves. In terms of demand for kitchen appliances, in 2023, dishwashers achieved retail sales of 1.94 million units, +2.3% year over year, and retail sales reached 11.2 billion yuan, or +9.6% year over year. The growth trend was significantly stronger than that of the market. In terms of share, in 2023, online and offline retail sales of range hoods CR3 were +3.8 pcts/+0.1 pct year on year, and online and offline retail sales of gas stoves CR3 were +7.5 pcts/+0.2 pct year over year, and the leading share continued to increase. Affected by the epidemic and sluggish real estate data, the last kitchen appliance brands have withdrawn from the industry one after another, and production capacity has gradually been cleared. As brands such as Vantage and Boss accelerate their layout and sink into the market, we expect brand concentration to increase further.
Maintain an “gain” investment rating. Considering that the company's 23H2 still has some bad debts, we lowered our profit forecast for 23-24 and raised our profit forecast for 2025. The company is expected to achieve net profit of 4.60/5.67/652 million yuan in 2023-2025 (previous value was 531/584/634 million yuan), +221.2%/+23.4%/+15.0% year-on-year, respectively, corresponding to current price-earnings ratios of 11 times/9 times/8 times, respectively. The company's layout has sunk early, and the coverage rate of core stores has been rising steadily. Revenue from new retail channels has grown rapidly in recent years, and the sinking market is clearly driven by incremental growth. We are optimistic that in the context of end-of-industry brands leaving one after another, the company's share is expected to continue to rise and maintain an investment rating of “gain”.
Risk warning: risk of fluctuations in raw material prices; risk of fluctuations in real estate policies and data.