Introduction to this report:
New vacuum cleaners, pet feeders, rice cookers, etc. are expected to bring in additional volume and increase in inventory.
Summary:
Profit forecast: The company's core categories have a stable market position, and traditional categories are constantly being iterated. New vacuum cleaners, pet feeders, rice cookers, etc. are expected to bring in new volume. We raised the company's 2024-2025 profit forecast and added a 2026 profit forecast. The company's net profit for 2024-2026 is expected to be 0.88/0.99/111 million US dollars (the value before 2024-2025 was US$0.771/78 million, an increase of +25%/+27%), +14%/+13%/+12% over the same period last year, with an “increase” rating.
Performance summary: In 2023, the company achieved operating income of 585 million US dollars, +19% year-on-year, and net profit of 77 million US dollars to mother, which significantly reversed losses over the previous year. Split to H2, 2023H2 achieved operating income of US$308 million, +16% year over year, and net profit of US$44.86 million to mother, +US$76.62 million year over year.
The results of expanding channels and categories have been remarkable, and the company's performance is in line with expectations. By channel, the company's Amazon channel revenue in 2023 was +11% year-on-year, accounting for 78%, and non-Amazon channel revenue was +61% year-on-year, accounting for 22% (+6pct). Relying on excellent product strength and brand influence formed by years of deep cultivation of the Amazon channel, the company has achieved rapid expansion of offline channels. In 2023, the total number of the company's products entering stores in Europe, America and Asia reached 16,000. By brand, the revenue of the three major brands of the company Levoit, Cosori and Etekcity in 2023 was +18%, +17%, and +31%, respectively, accounting for 56%, 33%, and 11%, respectively. The company's brand structure did not change significantly. By category, the company's purifiers had the highest omni-channel share in the US for two consecutive years; humidifiers changed from number one in Amazon in the US to number one in the US in omni-channel share. At the performance level, the company's 2023 gross profit margin was 46.9%, and the net profit margin was 13.2%, compared to 2023H1, +1.7pct and +1.5pct, respectively. We believe that lower freight and tariff costs, product structure optimization, and large-scale procurement cost reduction are important reasons for the company's profit margin increase.
Looking forward to the future, we believe that the company's logic of expanding categories has gradually worked out, and subsequent increases will be sufficient. The new vacuum cleaner product has been ranked No. 1 in the German market Bestseller within a quarter, showing strong potential for promotion. At the same time, the company is exploring more categories such as mother and baby, pets, rice cookers, etc., showing richer features in products at the same price, and subsequent sales are expected to exceed expectations. Among the Cosori brands, the company has advanced air fryer technology. It is the first air fryer in the industry to use a DC motor, which drastically shortens cooking time. With increased marketing in this category in 2024, subsequent performance is expected to achieve industry-leading performance.
Risk warning: Fluctuations in shipping costs bring some uncertainty on the cost side, and the pace of new product launch is insufficient