Event: In 2023, the company achieved total operating income of 85.60 billion yuan, +15.50% year on year, realized net profit of 2,837 billion yuan, +97.73% year on year, and realized net profit of non-deducted net profit of 2,355 billion yuan, +160.07% year on year.
Q4 The company achieved operating income of 20.701 billion yuan, +21.13% year on year, realized net profit of 411 million yuan, +12.66% year over year, and realized net profit of 293 million yuan after deduction, or +124.88% year on year.
Comment:
H2's overseas revenue growth was impressive, and the total number of orders signed by Sandian China increased year-on-year.
By region, domestic and foreign companies achieved revenue of 490.35/27.924 billion yuan respectively in '23, +15.04% and +12.28% year-on-year, H2 domestic revenue +11.83% YoY, and overseas revenue +29.75% YoY. In overseas markets, the company deepened localization and promoted R&D, production and marketing collaboration in '23. Overall revenue in ASEAN increased by more than 20% in '23, with its own brand business growing by more than 70% year-on-year.
By product, air conditioning/ ice washing/ other main businesses achieved operating revenue of 386.52/260.70/12.224 billion yuan respectively, +12.04%, +12.04% year-on-year, +22.93%, and +3.81% year-on-year, and H2 businesses were +12.47%/+34.95%/+1.54%, respectively.
In '23, the company's central air conditioning business revenue was +9.3% year-on-year, and the multi-line market share reached 20%. Qingdao Hisense Hitachi Air Conditioning Systems Co., Ltd., which is responsible for the central air conditioning production business, achieved revenue of 22.167 billion yuan and net profit of 1,627 billion yuan in '23.
In the household air conditioning sector, the company's online and offline retail sales were +41.4%/+14.3% year-on-year, respectively, higher than the industry's increase of 26 points and 10 points, respectively.
In '23, the company's automotive air conditioning compressors and comprehensive management segment achieved revenue of 9.05 billion yuan. The number of orders signed by Sandian Company increased 43% year over year, and the total number of orders signed for core thermal management system parts business in China increased 242% year over year.
Domestic business gross margin improved significantly in '23, and expenses increased in Q4.
In '23, the company achieved a gross profit margin of 22.08%, +1.40pct year on year, and Q4 achieved a gross profit margin of 22.04%, +0.65pct year on year. By product, the gross margin of HVAC/ice washing/other main businesses was +2.73/+1.58/+0.26pct year-on-year, respectively; by region, the gross margin of domestic and foreign businesses in '23 was +2.41/+0.77pct, respectively.
From an expense ratio perspective, the gross margins of sales/management/R&D/finance were -0.01/+0.23/+0.16/+0.01pct year-on-year, respectively, and Q4 companies' expense ratios were +1.62/+0.75/+0.27/+1.01 pct, respectively. The Q4 expense ratio has increased, so the Q4 company achieved a net profit margin of 1.99%, -0.15pct year on year; the company's net profit margin for the whole year was 3.31%, +1.38pct year on year.
Operating and working capital turnover improved, and net cash flow from operating activities increased significantly.
1) The company's monetary capital and transactional financial assets at the end of the 23-year period totaled RMB 18.131 billion, +42.10%; total end-of-period accounts receivable and notes amounted to RMB 99.67 billion, +27.62% at the beginning of the period; total inventory at the end of the 23-year period was 6.775 billion yuan, +3.38% compared to the beginning of the period; total contract liabilities at the end of the 23-year period amounted to RMB 1,440 billion, +25.77% compared to the beginning of the period, reflecting better revenue growth potential in the future.
2) The net cash flow from the company's operating activities in '23 was 10.612 billion yuan, +163.17% compared with the same period in '22. The net operating cash flow increased significantly, mainly due to improvements in the company's operating and working capital turnover.
The dividend rate is 49.04%. In '23, the company plans to distribute cash of 10.13 yuan for every 10 shares to all shareholders, with a total cash dividend of 1,391 billion yuan, and a dividend rate of 49.04%. The amount of dividends per share has increased over the previous 3 years.
Profit forecast and investment rating: We expect the company to achieve operating income of 960.11/1062.12/1153.92 billion yuan in 24-26, +12.2%/+10.6%/+8.6%, respectively, and net profit to mother of 32.94/37.53/4.236 billion yuan, +16.1%/+14.0%/+12.9%, respectively, corresponding to PE12.82/11.25/9.97x.
Risk factors: large fluctuations in raw material costs, consumer demand recovery falling short of expectations, overseas market expansion falling short of expectations, etc.